Spread Betting: Trading USD/DKK
The currency pair US dollar versus Denmark krone (USD/DKK) is not traded much. However, if you’re looking for a change from the usual spread bets, you might consider learning about Denmark’s economy to assist you in using this Forex pairing in your spread betting.
The USA economy is fairly well known to anyone who trades on the Forex, so it needs only passing mention here. As the international reserve currency, the US dollar continues to hold a certain strength regardless of the state of the US economy. However, there are signs that America is recovering from the global economic crisis, albeit only gradually and at great cost in terms of the gross national debt.
Important things to watch for are the regular announcements on the state of the United States. The Federal Reserve Board, in charge of setting official interest rates, meets monthly and issues cryptic statements as well as any interest updates. The unemployment rate is readily available, as are the nonfarm payroll figures – the term “nonfarm” simply means that the numbers do not include seasonal agricultural workers.
Denmark is primarily agricultural, although following the Second World War it expanded its industries, which now account for about 25% of the gross domestic product (GDP). Other traditional activities include fishing and shipbuilding. The agriculture includes livestock, root crops and cereals. Industrial activities include a wide variety of processes, including food processing, iron and steel, furniture, pharmaceuticals, etc. Most of the metals have to be imported, as Denmark’s resources are scarce.
Denmark relies heavily on foreign trade, and although a member of the European Union did not convert to the euro in 1999. The Danes enjoy a very high standard of living with extensive government welfare. It has a good balance of payments, selling food and energy in the form of oil, natural gas, wind and bio-energy abroad, even though it must import its raw materials.
Depending as it does on world trade, Denmark was hit hard by the global economic recession in 2007, and housing prices plummeted as unemployment rose. A spell of quantitative easing in 2010, with government spending increasing, has helped the situation.
Overall, despite the global economic climate the economy of Denmark is one that can be admired in many ways. They keep their independence, and perhaps most famously are known for creating and selling Lego.
Considering the fundamentals of both the United States and Denmark, it is easy to see that certain commodities will affect the economies in different ways. Denmark has a surfeit of energy, so any increase in the value of energy products is favourable for its economy. On the other hand, most of the materials for industrial production have to be imported, therefore it is vulnerable to the price of commodities such as steel.
But concentrating simply on fundamentals does not give you an idea of when and how to spread bet on this currency pair. You need to have a thorough knowledge of technical analysis so that you can time your bets to the mood of the market which you can determine through technical indicators such as the MACD.
Spread Betting on the USD/DKK
The Denmark krone is not traded much, so you will not find many commentaries on it, or recommendations of when to spread trade. This also means that you can make your own decisions about the trades without involving “expert opinion”, which may not be any better than yours. The current price for a rolling daily bet on the USD/DKK is 56,585.4 – 56,605.4.
As an example of a spread bet on this currency pair, say you thought that the Denmark krone was going to stay strong, while the US dollar would slide. In this case you would want to place a sell or short bet on the pair. As it is a volatile pair, with a daily range of several hundred points, you bet just £.50 per point.
If you are correct, and the price goes down, then you might close the bet when the quote became 56,123.8 – 56,143.8, and collect your winnings. You can work out how much you won quite simply by multiplying together the points and the stake, remembering that a short bet goes on at the lower quoted price and closes at the higher quoted price.
- Your bet was placed at 56,585.4.
- Your bet closed at 56,143.8.
- Therefore the number of points you gained is 56,585.4-56,143.8.
- The total number of points gained is 441.6.
- For your stake of £.50 per point, that is worth £220.80.
Any time you place a bet, you must watch out in case the price goes in the wrong direction for you. If the quote increased, you might have to close the bet for a loss to save you losing any more. Say the quote went up to 56,624.5 – 56,644.5 and you close the bet. The calculation is just as simple.
- Your bet was placed at 56,585.4.
- Your bet closed at 56,644.5.
- Therefore the number of points you lost is 56,644.5 – 56,585.4.
- The total number of points you lost is 59.1.
- For your stake of £.50 per point, that cost you £29.55.
As another example, you might think that Denmark’s economy was about to tank, with no one buying any Lego anymore. That would be a straight long bet on this currency pair, as it is the same thing as betting on the US dollar to rise in relation to it. Using today’s quote, you place a long bet for £2.50 per point at 56,605.4.
After a few days you are proved right, and your spread betting company quotes 57,115.2 – 57,135.2 on the USD/DKK. You close your bet and work out your winnings.
- Your bet was placed at 56,605.4.
- Your bet closed at 57,115.2.
- You gained a total of 57,115.2 less 56,605.4, equals 509.8 points.
- For your stake of £2.50 per point, this gives you £1274.50.
Once again, you need to accept that sometimes you will lose, and that in this case you have to close your bet quickly to avoid losing too much. Say the quote dropped to 56,526.1 – 56,546.1, and you closed the bet because you saw it wasn’t going your way.
- Your bet was placed at 56,605.4.
- Your bet closed at 56,526.1.
- You lost 79.3 points.
- For your stake of £2.50 per point, this cost you £198.25.
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