The most effective way to capitalize on currencies pairs that are 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
[B]Hedging Strategy of the Week
Currency Pair:[/B] CHF/JPY
[B]Entry Zone:[/B] Go both long and short at the market if the price is at any level within the 98.00-100.00 range
[B]Protective Stop:[/B] Long stop below 96.00 and short stop above 102.00
[B]Profit Target:[/B] Long Target at 100.00 and Short Target at 0.98.00
[B]Profit Potential:[/B] 200 pips (excluding transaction costs and slippage)
The CHF/JPY 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.
[B]Entry Zone[/B] -> Go both long and short at the market if [B]the currency is at any level within the Hedging Zone.[/B]
[B]Profit Taking[/B] ->Target for the long order is the [B]top of the entry zone[/B], for the short order is the [B]bottom of the entry zone[/B].
[B]Stop Levels are Key Support and Resistance Points[/B] -> 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.
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 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.
For more information on FXCM hedging strategies please visit What Is A Hedge Ratio? - FXCM UK
[B]Written by Antonio Sousa, Currency Analyst for DailyFX,com[/B]