GBP/CHF - The Best Pair to Apply a Hedging Strategy This Week

Hedging Strategy of the Week
§ Entry Zone: Go both long and short at the market if the price is at any level within the 2.4130-2.4200 range
§ Protective Stop: Long stop below 2.4070 and short stop above 2.4275
§ Profit Target: Long Target at 2.4200 and Short Target at 2.4130
§ Profit Potential: 70 pips (excluding transaction costs and slippage)

The GBP/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.

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 theAverage True Range, the Less Risky the Currency is for Hedging.

<SPAN style=“FONT-SIZE: 9pt; FONT-FAMILY: Arial”>[B]
Low Risk Hedging Opportunities - Currencies that are Ranging
Currency
% ATR Rank
Stop for Long
Hedging Zone
Stop for Short
Profit Range (in Pips)
EURCHF
|||||| 0.34%
1.6250
1.6330
1.6400
1.6475
70 pips
EURGBP
||||||||| 0.47%
0.6740
0.6756
0.6813
0.6846
57 pips
EURUSD
|||||||||||| 0.57%
1.3495
1.3575
1.3615
1.3670
40 pips
USDCAD
||||||||||| 0.60%
1.1228
1.1268
1.1335
1.1375
67 pips
GBPCHF
|||||||||||| 0.60%
2.4070
2.4130
2.4200
2.4275
70 pips

           [B]Medium Risk Hedging Opportunities - Currencies        that are Volatile[/B]
           [B]Currency[/B]
        [B]% ATR        Rank[/B]
        [B]Stop for        Long[/B]
        [B]Hedging        Zone[/B]
        [B]Stop for        Short[/B]
        [B]Profit[/B][B] Range[/B][B] (in        Pips)[/B]
           EURAUD
        ||||||||||||        0.65%
        1.6145
        1.6200
        1.6300
        1.6355
        100      pips
           GBPUSD
        |||||||||||||        0.67%
        1.9945
        2.0000
        2.0131
        2.0181
        131      pips
           AUDUSD
        |||||||||||||        0.70%
        0.8265
        0.8315
        0.8385
        0.8435
        70    pips
           CHFJPY
        |||||||||||||        0.71%
        97.45
        97.89
        98.34
        98.85
        45    pips
           EURJPY
        ||||||||||||||        0.75%
        158.95
        159.61
        160.85
        161.05
        124      pips
           
        
        
        
        
        
        
           [B]High Risk Hedging Opportunities - Currencies        that are Trending[/B]
           [B]Currency[/B]
        [B]% ATR        Rank[/B]
        [B]Stop for        Long[/B]
        [B]Hedging        Zone[/B]
        [B]Stop for        Short[/B]
        [B]Profit[/B][B] Range[/B][B] (in        Pips)[/B]
           USDJPY
        |||||||||||||||        0.77%
        117.45
        118.00
        118.42
        119.05
        42    pips
           GBPJPY
        |||||||||||||||||        0.88%
        231.95
        235.10
        238.87
        241.55
        377      pips
           AUDJPY
        ||||||||||||||||||        0.91%
        97.90
        98.50
        100.00
        100.55
        150      pips
           NZDUSD
        |||||||||||||||||||        0.97%
        0.7295
        0.7385
        0.7491
        0.7605
        106      pips
           NZDJPY
        |||||||||||||||||||||        1.22%
        85.95
        87.00
        89.00
        90.05
        200      pips
           USDCHF
        |||||||||||||||||||||        2.02%
        1.1920
        1.2027
        1.2259
        1.2555
        232      pips

**How is the % ATR Rank Calculated?

The average true range is the 90 days moving average of the currency’s 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.

[/B] 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 FXCM’s No Dealing Desk service. For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp