Are you looking for a way to increase your leverage to take advantage of your opinion of the stock market? Many traders find that trading the EUR/JPY is a way to do just that. If you look at the daily chart of the EUR/JPY below and compare it to a daily chart of the S&P 500, you will find that the lows and the highs are very similar. The swings between those points may be a little different, but the reversals are close enough to grab the attention of stock index traders. Why would they trade this market instead of the stock market? The answer is most likely leverage. The trading contest allows for leverage of 10:1 in your currency trades, which means that your margin for a $100,000 position is $10,000. That gives you the potential for bigger gains using this currency pair that you might get trading the same trending move in the S&P 500, NASDAQ 100 or Dow 30 indices. The reason for the relationship is that this pair is considered somewhat of a proxy for the carry trade. Carry traders buy those currency pairs with a positive rollover, so they can earn interest daily at the 4PM contest close in addition to the potential of earning on the market move itself. They are more confident in their carry trades if the stock market is rising and other markets are calm, so they take on the risk of opening a carry trade in the EUR/JPY or other JPY based pairs. When the stock market is falling, these carry traders will not take on that risk and will exit their trades. So the next time you find yourself bullish on the stock market and are looking for a trade to take advantage of that opinion, follow that same trade in the EUR/JPY to see if that would offer better results. You may find yourself using the FX markets more often like those other stock and futures traders who have found that you can get more bang for your buck by trading in the Spot FX market.

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