CHF/JPY Trading tutorial

Many forex traders try to focus on major currency pairs belonging to popular economies. But the opportunities in the foreign exchange market are far greater than this. Unpopular currency crosses, such as the CHFJPY present surprising trading opportunities too.

If you are new to this pair, you’ve visited the right page. We introduce the CHFJPY to you here, and we provide a step-by-step guide to trading it successfully.

What is CHFJPY?

The CHFJPY is the abbreviation for the Swiss Franc and the Japanese yen in the forex market chart. The price quote for the pair indicates how much Japanese yen you need to buy one Swiss franc. For instance, if the price for this cross is 131.12. It means you need ¥131.12 (Japanese yen) to buy SFr1, i.e. 1 Swiss Franc. Therefore, the exchange rate here for the Swiss Franc is 131.12yen.

The Swiss Franc and Japanese Yen are often paired with other major currencies, such as the USD and GBP. But the CHFJPY is not a famous pair, and you may not find it with all brokers.  

Despite being a minor pair, both currencies belong to successful and competitive economies that have had close trade ties with each other since the 1800s.

Background of the Swiss Franc and Japanese Yen 

The CHFJPY, Swiss Franc, and the Japanese Yen pairing are currencies belonging to two thriving and vigorous economies. 

Switzerland’s economy is a finance powerhouse, holding the world’s largest gold reserve. The country exports agricultural products, metal, automobiles, textiles, and machinery. 

It is also known as the “world banking capital,” seeing as it holds more than half of all private wealth in the world. Banking and tourism are also a prominent part of its incredible economy. 

Though the country is not part of the European Union, a portion of its market has close ties with the EU.

Its government first introduced the Swiss Franc in 1850 to unite the different parts of the country. At the time, the currency was pegged to the French franc. In 1945, Switzerland joined the Brent Wood System. Its Franc was then unpegged from the French franc to be joined to the US dollar.

This remained the case throughout that period. Until the early 2000s when it was pegged to the Euro. But now, the Swiss Franc is a floating and immensely valuable currency. This is because of the country’s wealth and position in world economies.

The Japanese yen was also introduced around the late 1800s. Like the Swiss Franc, it has gone through periods of devaluation. In the beginning, it was pegged to silver. But this changed in the early 1900s after western economies abandoned silver as the currency standard. Japan adopted gold as its currency standard at that time. 

Now, the Japanese yen is floating and a highly liquid currency in the forex market. Automobiles, spare parts, and electronic products are vital parts of Japan’s economy. 

The two economies play a crucial role in the world financial market. Switzerland, for investors, represents wealth, stability, and safety. It is where they turn to in times of world economic crisis. Japan is also the third-largest economy worldwide and the most powerful economy in Asia. The Japanese Central bank plays a crucial role in determining currency prices in the financial market.

Both countries have close trade relations, and their economies are very stable. It makes the exchange rate relatively more predictable than the other minors, presenting a profitable opportunity for traders. Although, some avoid it and focus on the majors.

The reason is the low liquidity and high volatility synonymous with such a pair. While both countries have enviable economies, the currencies put together are considered minor. But many traders find the opportunities to profit from such forex crosses as they come with the potential. Although not as much as the popular pairs.

What influences the CHFJPY exchange rate?

We have briefly described both countries’ economies above. Below, we list some factors that affect the price of the pair:

  • Global economic events

Switzerland is considered a “safe haven” for investors. Japan’s economy is also decidedly safe and stable. Therefore, investors flock to both currencies, mainly the Swiss, in times of world economic certainties. It causes the exchange rates to rise. Economic news chiefly affects this pair.

  • Both countries’ economic data

These data can include information on inflation, stock market reports, trade surplus or deficits, employment rates, GDP, and so forth. These factors have an enormous impact on the CHFJPY pair. 

  • Differences in Interest rate

The difference in interest rates offered by the Swiss National bank and the Bank of Japan greatly influences this pair. The currency with the higher interest can possibly strengthen against its counterpart.

How to trade the CHFJPY forex pair

The CHFJPY is not as liquid as the major forex pairs and is not offered by all brokers, as we’ve said. But there is a chance to trade it successfully. Although being a less popular forex pair, it may not be a suitable instrument for a rookie trader. One would have to first develop their skills and financial market experience. That would help with choosing the right strategy, and doing the appropriate analysis for successful trading.

Follow the steps below to trade the CHFJPY:

Choose a suitable broker

Ensure the broker offers the opportunity to trade this pair. Register with the broker after checking all these boxes: 

  • Regulated by reputable financial bodies
  • 24-5 quality support service 
  • Low minimum deposit to start small
  • Frew demo for testing the platform and trading strategies 
  • Competitive spreads and fees
  • Easy deposit and withdrawal methods

Use the free demo account for test trades

If you have learned some CHFJPY trading strategies, you have the opportunity to test them in a free demo account. You should also make sure you’re comfortable with your broker’s trading environment before you proceed to trade live.

Register and deposit funds in the trading account 

Enter your details on your broker’s website to sign up for a live account. Complete the registration by entering the required information in each step. Fund the trading account once it is ready for use. The broker should provide any easy payment methods through which you can deposit money. Your funds appear in the trading balance within minutes, and you can begin trading.

Select the CHFJPY 

You will find the CHFJPY pair with two exchange rates on the quote. If you’re new to forex, both prices might confuse you. The BUY/ASK price is the amount you pay the broker for the pair. If you click on BUY, you are expecting the exchange rate to increase. That means the Swiss Franc will gain value, and the Yen will weaken. If you click on SELL, you expect the exchange rate to drop. That is, the Japanese yen will strengthen against the Swiss Franc. 

Choose a position 

We have explained the BUY and the SELL position. Your analysis would determine the appropriate position to enter. If you have analyzed all the factors and believe the Swiss Franc will gain value, place a BUY trade. So as the exchange rate rises, you will make a profit in pips. But if your analysis favors the yen, then place a SELL trade. That is, you expect the exchange rate to drop.

Close the trade at the appropriate time

Exiting a trade also depends on your analysis and trading style. Timing is an essential element in forex trading. If one is not careful of this, you can either lose the profit or your entire funds. Improper timing can also cause you to miss out on opportunities to earn more. At the right time, once your trade matures, exit the position by clicking on the appropriate button.

The best time to trade the CHFJPY

Since this cross is a minor one, it is not as liquid as other major ones. The implication is that there might be times when demand for the CHFJPY is low, making it difficult to buy or sell.

Therefore, the best time to trade this instrument is when its market is highly active. The CHFJPY market sees high activities during the London New York time overlap. That’s between 1 PM and 5 PM GMT. 

Another great time to trade this pair is during important economic releases which relate to both economies. 

For instance, let’s say the price of gold is expected to fall drastically. This could affect the Swiss Franc value, so you enter a SELL trade, expecting the exchange rate to drop so you can earn your profit.

Pros of trading the CHFJPY 

Avoid US dollar volatility 

Most currency pairs require conversion to the USD while trading on them. It attracts extra fees, and the rates might be unfavorable. The CHFJPY does not require conversion and can be traded directly. 

The pair is easily predictable 

The CHFJPY can mostly be traded on economic news. The economies are among the most stable in the world. Understanding how the market reacts to economic news can help the trader accurately forecast price moves. Good knowledge of fundamental analysis will help one succeed in trading this asset.

Profit from its volatility 

This pair has a strong enough volatility, offering skilled traders the opportunity to make a good profit.

Cons of trading the CHFJPY pair 

Not as liquid as major pairs 

Though the Japanese yen is one of the most liquid currencies, paired with the Swiss Franc, it suffers an occasional lack of demand. Fortunately, there are times during the day when the pair trades high volume. Traders can benefit from the CHFJPY once they understand its timing.

Strategies for trading the CHFJPY pair

Here are some strategies that work best with this pair:

Scalping

This approach involves closing trade positions within minutes. Scalpers buy and hold forex pairs for between 1 to 5 minutes using real-time analysis. The goal is to make small profits from tiny price gaps. These minute profits add up to a reasonable amount at the end of the day. If it is used with the CHFJPY pair, the strategy can generate good profit for the trader. 

MACD 5-Minute strategy 

This is another form of scalping, but trade is dependent on signals from the Moving Average Convergence Divergence (MACD). The timeframe used here is 1 minute, 5 minutes, or 15 minutes. You first need to spot the trend by calculating the Moving Average. You can calculate the 100-day or 50-day Moving average on the CHFJPY price chart. If the price consistently moves above the 100-day Moving Average, that indicates an upward trend. If it moves below, it shows a downtrend. Once you identify the trend you can then look for BUY or SELL signals. Look for the point where the MACD line breaks i.e, the crossover of the MACD. This is a signal to enter a BUY or SELL trade, depending on the direction of the trend.

Support and resistance trading

Support is the point in the price chart where the price stops falling and starts to rise in a downtrend market. Resistance occurs in an uptrend market. The price stops going up and begins to fall. Support and resistance and points where the prices change direction and a new trend could emerge. The CHFJPY sees a fair amount of volatility during the day. The trader can find many opportunities with this strategy because of this. The basic approach is to enter a BUY trade near support, i.e, where the price starts to rise. Place a SELL trade near the resistance level, the point where the price begins to fall. Since prices tend to make unexpected moves, you can’t be certain that the support or resistance will be maintained. It is safe to make sure the price is staying in that direction before entering the trade. The way to do this is to always hold on till the price consolidates near these areas. If it is the support point, ensure the price moves higher than the point where it rises. This indicates consolidation and is a signal to go long (BUY). If it is at the resistance point, allow the price to fall lower than the resistance level to show it is moving in that direction. Then enter a short trade (SELL).

Trading the news

We have explained how the CHFJPY is heavily affected by world economic events and both countries’ economic data. News releases that affect both economies can easily influence their price movement. However, the trader must endeavor to gain knowledge of the forex market and the behavior of market participants when such news gets released. Once they do this, the technique can be profitable with the CHFJPY. 

Some experienced traders combine different strategies in their trading. It all depends on the market conditions and the trader’s comfortability with the techniques. You must also consider some risks management while trading this minor pair.

Possible risks of trading the CHFJPY 

Low liquidity 

As we have said, the CHFJPY does not experience high demands like other major forex pairs. There can be days when there is no liquidity, and it becomes tough to trade freely. 

High risk of unpredictable instability 

Volatility is a good thing since traders can only profit from such conditions. But with the CHFJPY, the market tends to make unexpected, unforeseen sudden shifts that can cause significant losses to traders. It is vital to be aware of this while trading this pair.

The “Safe-haven” dilemma 

Both Switzerland and Japan are considered “safe havens”. It becomes difficult to determine which currency out of the CHFJPY pair would appreciate during times of global economic problems.

Risk of leverage

Leverage allows the trader to increase their capital with borrowed funds. There’s a potential to make it big here. But there is also a great risk of massive loss. Remember that this pair can be highly unpredictable, and use leverage with great caution.

We should mention that these risks are typical with other minor and exotic pairs too. Some other currencies and market instruments carry greater risks. Being aware of them helps you mentally prepare before beginning to trade the CHFJPY. Trading the forex market is a bit like gambling. If you have decided on this path, you must accept that your invested capital is at risk.  

It helps to minimize the hazards of trading the financial market as much as you can. The best way to do this is to choose a reputable broker, as we have said. We have a few recommendations, and we will give you a summary of their offerings below. 

The best brokers offering the CHFJPY pair

Among the well-known good brokers offering the CHFJPY, here are three highly recommended ones:

  • Vantage markets
  • Roboforex
  • Markets.com

Read below for an overview of each broker

Vantage markets

Vantage markets is an Australian-based brokerage firm established in 2009. The company now has a presence all over Europe, Asia, Africa, and the Islands. And it operates under licenses from several acclaimed financial bodies, including:

  • Australia Securities and Investments Comm ASIC 
  • Financial Conduct Authority FCA 
  • Cayman Islands Monetary Authority CIMA

Vantage markets is a safe and trusted broker, offering quality services at competitive fees. Traders can access accounts on any internet-enabled device and enjoy exciting trading features, such as automated trading.

Vantage markets overview

  • Minimum deposit – $200
  • Leverage – 1:500
  • Type of spread – Variable
  • Average spread – 1.22pip (on forex majors)
  • ECN account – Yes
  • Commission – $3 per lot 
  • Platform – Mt4, Mt5, Webtrader, Mobile app
  • Funding method – Visa, MasterCard, Bank wire, Paypal, Bitcoin, Skrill.
  • Support – 24-5
  • Other features – social trading with Zulutrade and MyFxbook. 

Roboforex 

Roboforex has won several awards and is known as the best broker for newcomers. The company was founded in 2009 and now has about 4million clients in 169 countries. Its headquarters is in Belize, and it operates under the International Financial Service Commission (IFSC) license. It is also registered with the Cyprus Securities and Exchange Commission CySEC. 

The broker is well-known and provides quality support service. New and existing traders get bonuses when they sign up and trade actively. New and inexperienced traders choose Roboforex because of its beginner-friendly trading platforms and responsive support services.

Roboforex summary 

  • Minimum deposit – $10
  • Leverage – 1:2000
  • Type of spread – Variable
  • Average spread – 1.3pips (on forex majors)
  • ECN account – Yes
  • Commission – $2
  • Platform – Mt4, Mt5, cTrader, Rtrader
  • Funding method – Visa, MasterCard, Bank wire, Unionpay, Neteller, Skrill.
  • Support – 24-5
  • Other benefits – welcome bonus, deposit bonus.

Markets.com

Markets.com offers a unique trading platform that caters to beginners and intermediate and experienced traders. The broker is a trusted and well-regulated firm based in Cyprus. It is registered with several acclaimed financial bodies, including:

  • Cyprus Securities and Exchange Commission CySEC 
  • Financial Sector Conduct Authority FSCA 
  • Financial Conduct Authority FCA 
  • Australia Securities and Investments Comm ASIC 

Markets.com was established in 2008 and has continued to grow since then. The broker offers a conducive trading environment with highly competitive fees. 

Markets.com at a glance

  • Minimum deposit – $100
  • Leverage – 1:300
  • Type of spread – Variable
  • Average spread – 1.9pips (on forex majors)
  • ECN account – No
  • Commission – $0 on forex
  • Platform – Mt4, Marketsi, Marketsx
  • Funding method – Visa, MasterCard, Bank wire, Paypal, Neteller, Skrill.
  • Support – 24-5

These three are trustworthy brokers offering the CHFJPY pair. There are other trusted brokerage firms in the market if you are not satisfied with their basic offers. 

The CHFJPY can be an extremely profitable forex pair if traded properly. The key things are:

  • Choose a reputable broker with low fees
  • Test new strategies with a demo
  • Trade at the appropriate time, when its market is most active
  • Be aware of the risks and always take advantage of the risk measures offered by the broker.

It is comparatively safe to add the CHFJPY to your investment portfolio once you have considered all that is written in this tutorial. That means there is an understanding of all the risks of trading this minor pair. You then choose the right broker, use an effective strategy with the right timing, and engage all the risks management measures available. It will increase your earnings and trading experience.

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