cient of Variation
1.91831.93251.70471.72321.81860.227812.52611.81940.06263.4433
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BRITISH POUND
FIGURE 8.7 GBPUSD OHLC and Activity Chart 2000–2005
STATISTICS
The annual data above can be summarized as in the list below.
GBPUSD Properties 2000–2005
Year200020012002200320042005
High1.65791.51041.61421.79421.95501.9325
Low1.39531.36851.40441.54621.74821.7047
Mean1.51601.44071.50381.63561.83321.8194
Rel Range17.20169.857913.900514.848511.168712.5261
Coef Var4.49411.64444.16833.27642.30523.4433
A quick survey of the list above indicates that all values fall again within expectedboundaries. The average annual range during the overall time frame (1/1/2000 through3/31/2006) was 2,162 pips.
CHAPTER 9
Monthly Charts
OHLC AND ACTIVITY CHARTS
In  the  current  chapter,  we  examine  recent  market  behavior  in  the  GBPUSD  currencypair for the months January through March 2006 using daily interval data. (See Figures9.1 through 9.3.)
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BRITISH POUND
FIGURE 9.1 GBPUSD OHLC and Activity January 2006
GBPUSD Properties January 2006
OpenHigh LowCloseMeanMidrangeAbsolute RangeRelative RangeStandard DeviationCoefﬁcient of Variation
1.72321.79371.71871.76861.76601.75620.07504.27060.01490.8421
Monthly Charts
69
FIGURE 9.2 GBPUSD OHLC and Activity February 2006
GBPUSD Properties February 2006
OpenHighLowCloseMeanMidrangeAbsolute RangeRelative RangeStandard DeviationCoefﬁcient of Variation
1.77930.78221.72781.74011.74801.75500.05443.09970.01090.6211
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BRITISH POUND
FIGURE 9.3 GBPUSD OHLC and Activity March 2006
GBPUSD Properties March 2006
OpenHighLowCloseMeanMidrangeAbsolute RangeRelative RangeStandard DeviationCoefﬁcient of Variation
1.75341.76261.72311.74611.74491.74290.03952.26640.01000.5708
Monthly Charts
STATISTICS
71
The charts and tables yield the summary in the list below.
GBPUSD Properties January–March 2006
MonthJanFebMarAvg
High1.79371.78221.76261.2233
Low1.71871.72781.72311.1828
Mean1.76601.74801.74491.2030
Rel Range4.27063.09972.90842.2664
Coef Var0.84210.62110.73320.5708
CHAPTER 10
Composite Charts
DAILY COMPOSITE CHARTS
Refer  to  Chapter  2,  Tools  of  the  Trade,  for  a  detailed  description  of  both  daily  andweekly composite charts.
The time frame in the following charts (Figures 10.1 through 10.6) spans 1/1/2004through 12/31/2005. Daily composite activity charts are calculated by averaging the sumof  the  upticks  and  downticks  over  that  period  using  one-minute  time  intervals.  Theirpurpose  is  to  assist  traders  in  determining  when  to  schedule  online  trading  sessionsbased upon traders’ predilection to the nebulous risk/reward factor and the volatility ofthe targeted currency pair.
The vertical numeric scale on the right of each chart is activity expressed in totalnumber of ticks (upticks plus downticks) during each time interval. The bottom band(the darkest) represents the activity for the current ﬁve-minute interval. The sum ofboth  the  upper  and  lower  bands  represents  activity  for  the  most  recent  ten-minute interval.
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BRITISH POUND
FIGURE 10.1 Sunday Composite Activity Chart
Composite Charts
75
FIGURE 10.2 Monday Composite Activity Chart
76
BRITISH POUND
FIGURE 10.3 Tuesday Composite Activity Chart
Composite Charts
77
FIGURE 10.4 Wednesday Composite Activity Chart
78
BRITISH POUND
FIGURE 10.5 Thursday Composite Activity Chart
Composite Charts
79
FIGURE 10.6 Friday Composite Activity Chart
80
BRITISH POUND
WEEKLY COMPOSITE CHARTS
The  following  weekly  composite  (Figure  10.7)  displays  average  hourly  activity  ex-pressed  in  ticks  (the  sum  of  upticks  plus  downticks)  for  the  two-year  time  frame1/1/2004 through 12/31/2005.
The  following  weekly  composite  (Figure  10.8)  displays  average  hourly  range  ex-pressed as pips in the rightmost column for the two-year time frame 1/1/2004 through12/31/2005.
FIGURE 10.7 Weekly Composite Activity Chart
Composite Charts
81
FIGURE 10.8 Weekly Composite Range Chart
By scrutinizing both the composite activity chart and the composite range chart fora  speciﬁc  currency  pair,  speculators  can  schedule  their  trading  sessions  according  totheir propensity toward overall volatility and risk factors.
PART IV
Swiss Franc
CHAPTER 11
History ofthe Swiss Franc
WHY TRADE THE SWISS FRANC?
With its long tradition of political and military neutrality, Switzerland holds a position ofelevated respect in the arena of international banking and ﬁnance. Countries undergo-ing social and political uncertainty frequently convert liquid assets to the Swiss Franc inhopes of achieving a modicum of economic stability and security.
The International Standards Organization (ISO) symbol for the Swiss Franc is CHFwhich is an abbreviation for Confoederatio Helvetica (Latin for the Helvetian Confeder-ation). This nomenclature avoids giving preference to any of the four ofﬁcial languagesof Switzerland: German, French, Italian, and Romansh.
HISTORICAL PERSPECTIVE
The roots of modern Swiss sovereignty began in the 13th century. In 1291, the cantonsof Uri, Schwyz, and Unterwalden conspired against the ruling Habsburgs. Their union isrecorded in the Federal Charter, a document probably written after the fact. At the bat-tles of Morgarten in 1315 and Sempach in 1386, the Swiss defeated the Habsburg armyand secured a de facto independence.
By 1353, the three original cantons, joined by the cantons of Glarus and Zug and thecity states of Lucerne, Zurich, and Berne, formed the “Old Federation” of eight statesthat persisted during much of the 15th century.
In  1518  Huldrych  Zwingli  was  elected  priest  of  the  Great  Minster  church  inZurich. Zwingli’s Reformation of 1523 was supported by the magistrate and popula-tion  of  Zürich  and  led  to  signiﬁcant  changes  in  civil  life  and  state  matters.  The 
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SWISS FRANC
reformation  spread  from  Zürich  to  ﬁve  other  cantons  of  Switzerland,  while  the  re-maining  ﬁve  sternly  held  onto  the  Roman  Catholic  faith,  leading  to  intercantonalwars in 1529 and 1531.
The  Thirty  Years  War  (1618–1648),  a  religious  conﬂict  between  Protestants  andCatholics,  was  fought  principally  on  the  territory  of  current  day  Germany,  but  in-volved  most  of  the  major  continental  powers.  During  this  period,  Switzerland  re-mained a relative oasis of peace and prosperity in war-torn Europe, mostly becauseall  the  major  powers  in  Europe  were  depending  on  Swiss  mercenaries,  and  theywould not let Switzerland fall into the hands of one of their rivals. This is probablythe  ﬁrst  example  of  Swiss  neutrality  being  enforced  by  outsiders.  At  the  Treaty  ofWestphalia  in  1648,  Switzerland  attained  legal  independence  from  the  Holy  RomanEmpire.
During the French Revolutionary Wars, Napoleon’s armies moved eastward throughSwitzerland in their battles against Austria. In 1798 Switzerland was completely overrunby the French and became the Helvetic Republic. The Congress of Vienna of 1815 fullyreestablished  Swiss  independence,  and  the  European  powers  agreed  to  permanentlyrecognize Swiss neutrality. 
During both World War I and World War II, Switzerland managed to maintain a po-sition of armed neutrality and was not involved militarily. Switzerland reacted to NaziGermany’s  invasion  of  Poland  by  a  mobilization  of  some  430,000  troops.  On  May  11,1940, the day following Hitler’s attack on Belgium, general mobilization of the full armywas  ordered,  which  for  the  ﬁrst  time  included  some  15,000  women.  Switzerland  ob-served  a  restrictive  immigration  policy  during  the  war,  but  nevertheless  some  26,000Jews and other refugees were granted asylum. Nazi Germany drew up plans to invadeSwitzerland,  most  notably  “Operation  Tannenbaum,”  but  the  invasion  was  never  car-ried out.
In 1963, Switzerland joined the Council of Europe. Women were granted the right tovote only in 1971, and an equal rights amendment was ratiﬁed in 1981. In 1979, parts ofthe canton of Berne attained independence, forming the new canton of Jura.
Switzerland’s role in many United Nations and international organizations helped tomitigate the country’s concern for neutrality. In 2002, Switzerland was ofﬁcially ratiﬁedas a member of the United Nations—the only country joining after agreement by a pop-ular vote.
Switzerland is not a member state of the EU, but has been (together with Liechten-
stein) surrounded by EU territory since Austria joined the EU in 1995. 
In  2005,  Switzerland  agreed  by  popular  vote  to  join  the  Schengen  Treaty  (anagreement  among  European  states  that  allows  for  common  immigration  policies and a border system) and the Dublin Convention (a European Union law to stream-line the application process for refugees seeking political asylum under the GenevaConvention).
The Swiss Franc has historically been considered a safe haven currency with virtu-ally zero inﬂation and a legal requirement that a minimum 40 percent is backed by gold
History of the Swiss Franc
87
reserves. However, this link to gold, which dates from the 1920s, was terminated on May1,  2000,  following  an  amendment  to  the  Swiss  Constitution.  The  Swiss  Franc  has  suf-fered devaluation only once, on September 27, 1936, during the Great Depression, whenthe  currency  was  devalued  by  30  percent  following  the  devaluations  of  the  BritishPound, U.S. Dollar and French Franc.
BANKNOTES AND COINS
Since 1907, when the ﬁrst series of Swiss banknotes was printed, eight series have beenprinted, six of which have been released for use by the general public. The current (8th)series of banknotes was designed by Jörg Zintzmeyer around the theme of the arts andwas released starting in 1995. (See Figures 11.1 and 11.2.)
FIGURE 11.1 1000 and 200 Swiss Francs
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SWISS FRANC
FIGURE 11.2 100 and 50 Swiss Francs
The  ﬁrst  Swiss  coins  were  released  in  1850.  Before  this  date,  the  different  Swiss
cantons had their own money, with different names and values. (See Table 11.1.)
In  addition  to  these  general  circulation  coins,  numerous  series  of  commemora-tive coins have been issued, as well as gold coins including the well-known Vreneli.These  coins  generally  remain  legal  tender,  but  are  not  used  as  such  because  their material  or  collector’s  value  usually  exceeds  their  face  value.  (See  Figures  11.3through 11.5.)
History of the Swiss Franc
89
TABLE 11.1 Overview of Current Swiss Coins
Value
Diameter(mm)
Thickness(mm)
Weight(g) Alloy 
1 centime5 centimes10 centimes20 centimes50 centimes1 franc2 francs5 francs
16.0017.1519.1521.0518.2023.2027.4031.45
1.101.251.451.651.251.552.152.35
1.51.83.04.02.24.48.813.2
Bronze Aluminum bronzeCupronickelCupronickelCupronickel (silver until 1967)Cupronickel (silver until 1967)Cupronickel (silver until 1967)Cupronickel (silver until 1967)
FIGURE 11.3 Five Swiss Francs—Obverse and Reverse
FIGURE 11.4 Two Swiss Francs—Obverse and Reverse
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SWISS FRANC
FIGURE 11.5 One Swiss Franc—Obverse and Reverse
For additional details, visit http://en.wikipedia.org.
CHAPTER 12
Annual Charts
OHLC AND ACTIVITY CHARTS
In this chapter, we examine historical charts for the years 2000 through 2005 using dailyinterval data. In the lower portion of each chart, activity is expressed in terms of ticks ofthe currency pair. (See Figures 12.1 through 12.7.)
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SWISS FRANC
FIGURE 12.1 USDCHF OHLC and Activity Chart 2000
USDCHF Properties 2000
OpenHighLowCloseMidrangeAbsolute RangeRelative RangeArithmetic MeanStandard DeviationCoefﬁcient of Variation
1.59081.83091.54271.61111.68680.288217.08561.68890.06103.6121
Annual Charts
93
FIGURE 12.2 USDCHF OHLC and Activity Chart 2001
USDCHF Properties 2001
OpenHighLowCloseMidrangeAbsolute RangeRelative RangeArithmetic MeanStandard DeviationCoefﬁcient of Variation
1.61051.82261.56750.66161.69510.255115.04971.68710.05583.3049
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SWISS FRANC
FIGURE 12.3 USDCHF OHLC and Activity Chart 2002
USDCHF Properties 2002
OpenHighLowCloseMidrangeAbsolute RangeRelative RangeArithmetic MeanStandard DeviationCoefﬁcient of Variation
1.66161.72291.38051.38241.55170.342422.06611.55530.09245.9419
Annual Charts
95
FIGURE 12.4 USDCHF OHLC and Activity Chart 2003
USDCHF Properties 2003
OpenHighLowCloseMidrangeAbsolute RangeRelative RangeArithmetic MeanStandard DeviationCoefﬁcient of Variation
1.38241.42541.23101.23901.32820.194414.63631.34430.03982.9632
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SWISS FRANC
FIGURE 12.5 USDCHF OHLC and Activity Chart 2004
USDCHF Properties 2004
OpenHighLowCloseMidrangeAbsolute RangeRelative RangeArithmetic MeanStandard DeviationCoefﬁcient of Variation
1.23841.32261.12881.13921.22570.193815.81141.24190.04503.6251
Annual Charts
97
FIGURE 12.6 USDCHF OHLC and Activity Chart 2005
USDCHF Properties 2005
OpenHighLowCloseMidrangeAbsolute RangeRelative RangeArithmetic MeanStandard DeviationCoefﬁcient of Variation
1.14011.32871.13721.31361.23300.191515.53191.24610.05054.0515
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SWISS FRANC
FIGURE 12.7 USDCHF OHLC and Activity Chart 2000–2005
STATISTICS
USDCHF Properties 2000–2005
Year200020012002200320042005Avg
High1.83091.82261.72291.42541.32261.32871.5755
Low1.54271.56751.38051.23101.12881.13721.3704
Mean1.68891.68711.55531.34431.24191.24611.4606 
Rel Range17.085615.049722.066114.636315.811415.531916.6968
Coef Var3.61213.30495.94192.96323.62514.03983.9145
CHAPTER 13
Monthly Charts
OHLC AND ACTIVITY CHARTS
In  the  current  chapter,  we  examine  recent  market  behavior  in  the  USDCHF  currencypair for the months January through March 2006 using daily interval data. (See Figures13.1 through 13.3.)
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SWISS FRANC
FIGURE 13.1 USDCHF OHLC and Activity January 2006
USDCHF Properties January 2006
OpenHighLowCloseMeanMidrangeAbsolute RangeRelative RangeStandard DeviationCoefﬁcient of Variation
1.31361.31641.25561.28691.27921.28600.06084.72780.01210.9440
Monthly Charts
101
FIGURE 13.2 USDCHF OHLC and Activity February 2006
USDCHF Properties February 2006
OpenHighLowCloseMeanMidrangeAbsolute RangeRelative RangeStandard DeviationCoefﬁcient of Variation:
1.27811.32311.27721.32261.30561.30020.04593.53040.00880.6778
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SWISS FRANC
FIGURE 13.3 USDCHF OHLC and Activity March 2006
USDCHF Properties March 2006
OpenHighLowCloseMeanMidrangeAbsolute RangeRelative RangeStandard DeviationCoefﬁcient of Variation:
1.31171.32321.28711.29671.30431.30520.03612.76600.00960.7348
Monthly Charts
STATISTICS
103
USDCHF Properties January–March 2006
MonthJanFebMarAvg
High1.31641.32311.32321.3209
Low1.18011.27721.28711.2481
Mean1.27921.30561.30431.2963
Rel Range4.72783.53042.76603.6747
Coef Var0.94400.67780.73320.7348
CHAPTER 14
Composite Charts
DAILY COMPOSITE CHARTS
See Chapter 2, Tools of the Trade, for a detailed description of both daily and weeklycomposite charts
The time frame in the following charts spans 1/1/2005 through 4/14/2006. (See Fig-ures 14.1 through 14.8.) Daily composite activity charts are calculated by averaging thesum  of  the  upticks  and  downticks  over  that  period  using  one-minute  time  intervals.Their purpose is to assist traders in determining when to schedule online trading ses-sions  based  upon  traders’  predilection  to  the  nebulous  risk/reward  factor  and  thevolatility of the targeted currency pair.
The vertical numeric scale on the right of each chart is activity expressed in totalnumber of ticks (upticks plus downticks) during each time interval. The bottom band(the darkest) represents the activity for the current ﬁve-minute interval. The sum of thelower and upper bands represents ten-minute activity.
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SWISS FRANC
FIGURE 14.1 Sunday Composite Activity Chart
Composite Charts
107
FIGURE 14.2 Monday Composite Activity Chart
108
SWISS FRANC
FIGURE 14.3 Tuesday Composite Activity Chart
Composite Charts
109
FIGURE 14.4 Wednesday Composite Activity Chart
110
SWISS FRANC
FIGURE 14.5 Thursday Composite Activity Chart
Composite Charts
111
FIGURE 14.6 Friday Composite Activity Chart
112
SWISS FRANC
WEEKLY COMPOSITE CHARTS
FIGURE 14.7 Weekly Composite Activity Chart
Composite Charts
113
FIGURE 14.8 Weekly Composite Range Chart
PART V
Japanese Yen
CHAPTER 15
History ofthe Japanese Yen
WHY TRADE THE YEN?
The Japanese economy is one of the strongest in the world. Only the United States has ahigher Gross Domestic Product. Japan’s main export goods are cars, electronic devices,and computers. The most important single trade partner is the United States, which im-ports more than one-quarter of all Japanese exports. Other major export countries areTaiwan, Hong Kong, South Korea, China, and Singapore.
Japan has a large surplus in its export/import balance. The most important importgoods  are  raw  materials  such  as  oil,  foodstuffs,  and  wood.  Major  suppliers  are  theUnited States, China, Indonesia, South Korea, and Australia. Manufacturing, construc-tion, distribution, real estate, services, and communication are Japan’s major industriestoday. Agriculture makes up only about 2 percent of the GNP. The most important agri-cultural product is rice. Resources of raw materials are very limited and the mining in-dustry rather small.
HISTORICAL PERSPECTIVE
The history of Japan is lost in legend, and reliable records date back only to about A.D.400. Korean invaders probably introduced bronze and iron implements around the ﬁrstcentury. Portuguese sailors made the ﬁrst European contact with Japan in 1542. Com-mercial trading with the West developed gradually but only on a very limited scale.
The Yen was established as the ofﬁcial unit of currency in 1871 by order of the Meijigovernment. The Bank of Japan, established in 1882, issued its ﬁrst Yen bank notes in1885.
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118
JAPANESE YEN
In 1945, in accordance with the emergency measures intended to suppress the post-war hyperinﬂation, the Japanese people were obligated to deposit their money by a cer-tain  date  in  monetary  institutions  for  a  speciﬁc  period  of  time.  Banknotes  then  incirculation were made invalid. Withdrawal of the frozen deposits in the form of the newbanknotes was then allowed to a limited extent. But not enough new banknotes wereprinted  for  withdrawal.  To  cope  with  this,  existing  banknotes  with  adhesive  stickerswere regarded as new banknotes and circulated until the end of October in that year asa makeshift arrangement.
Japan’s economy crashed as a result of defeat by the Allies, causing a 49.6 billionYen loss due to wartime damages. The total reached 1.38 trillion Yen by the end of 1947(equal to 20 percent of Japan’s pre-war domestic assets). National income dropped to6.5 million Yen.
In 1946 the Economic Stabilization Board was established, which put almost all sec-tors of the national economy (commodities, prices, transport, banking, etc.) under thesystematic control of the board. In October the Reconstruction Finance Bank was es-tablished, which furnished enormous volumes of funds to industries vital to economicrecovery, such as the coal, steel, and chemical fertilizer industries.
In 1949 Joseph Dodge, the economic advisor to the General Headquarters of the Al-lied Occupation Forces, mapped out the Dodge Line Policy to promote a self-sustainingeconomy. This plan established a single exchange rate for the Yen and attempted to sta-bilize  the  currency  as  well  as  close  the  gap  between  domestic  and  overseas  prices  ingeneral. It also curtailed government spending with a tight-money policy. By this time,the exchange rate had risen to 360 Yen to the U.S. dollar.
During the Korean War (1950–1953), special procurement contracts by the Ameri-can  government  for  goods  and  services  generated  $315  million  for  Japan.  During  thistime period, Japan attempted to reduce dependence on imports by increasing modern-ization of processing in the four major industries (steel, coal, etc.), importing new tech-nologies,  and  improving  on  old  ones  (synthetic  ﬁbers  and  petrochemicals).  Japan’sforeign exchange reserves quadrupled from $260 million in 1949 to $1.06 billion in 1951.In 1953 Japanese exports were 50 percent greater than before the Korean War. Domesticprices rose in response to the increase in export and import prices.
Due  to  a  drop  in  exports  from  1963  to  1965,  Japan  experienced  another  reces-sion. The government issued long-term public bonds. Foreign exchange reserves re-mained stable at about $2 billion. From 1965 to 1970, the Japanese economy began toprosper.  Average  growth  rate  of  the  economy  remained  stable  at  11.8  percent  forthese  ﬁve  years.  Today,  Japan  has  the  second  highest  GNP  in  the  world  behind  theUnited States.
In  1971  Japan’s  foreign  exchange  reserves  reached  $15.2  billion.  Modernizationof industrial equipment over the past 10 years resulted in better prices and more efﬁ-cient  production  of  goods.  The  Bretton  Woods  system  of  ﬁxed  exchange  rates  forcurrency worldwide collapsed as a result of the devaluation of the U.S. dollar. Presi-dent  Nixon  enacted  an  emergency  policy  that  applied  a  10  percent  surcharge  to 
History of the Japanese Yen
119
imports  to  the  United  States  and  also  suspended  the  conversion  of  the  U.S.  dollarinto gold.
The  Smithsonian  ﬂoating  exchange  rates  for  worldwide  currencies  were  imple-mented in 1973. The Japanese Yen was revalued against the U.S. dollar at a lower rate,causing  an  increase  in  imports  into  Japan  due  to  cheaper  import  prices.  In  the  sameyear  war  broke  out  in  the  Middle  East,  the  export  of  crude  oil  was  temporarily  sus-pended, and oil prices increased worldwide. Japan was one