EUR/CHF - The Best Pair to Apply a Hedging Strategy This Week
The EUR/CHF is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone.
For Currency Pairs that are trading sideways, HEDGING is the best strategy to implement. This involves putting a buy and sell order in the same currency pair at the same time in one account. Every day, we rank the major currency pairs by suitability for hedging. Rules for Following the Hedging Radar
1) Entry Zone -> Go both long and short at the market if the currency is at any level within the Hedging Zone.
2) Profit Taking ->Target for the long order is the top of the entry zone, for the short order is the bottom of the entry zone.
3) Stop Levels are Key Support and Resistance Points -> Place the actual stops a few pips above the higher level and a few pips below the lower level. The break of these levels signals that the ranges have been broken and the hedging strategy should no longer be implemented.
4) The lower the Average True Range, the Less Risky the Currency is for Hedging.
**How is the % ATR Rank Calculated? The average true range is the 90 days moving average of the currencys true range. The true range is the greatest of: the difference between the current high and the current low; the difference between the current high and the previous close or the difference between the current low and the previous close. The %ATR is the relative value of the ATR when weighted against the price. For example, if the ATR for the EURGBP is 26 pips then the %ATR is 0.4 percent since 0.0026/0.6602 = 0.4% where 0.6602 is the quoted price of the EURGBP. Hedging Strategy of the Week
Entry Zone: Go both long and short at the market if the price is at any level within the 1.6022-1.6218 range
Profit Target: Long Target at 1.6218 and Short Target at 1.6022
Protective Stop: Long stop some pips below 1.5929 and Short Stop slightly above 1.6286
Profit Potential: 196 pips ( excluding transaction costs and slippage)
The EUR/CHF is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.
Want More Information on Hedging?
The most effective way to capitalize on currencies pairs that trapped in tight ranges is through the use of hedging. The hedging feature is currently available on all accounts using FXCMs No Dealing Desk service. For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp