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EUR/CHF forex trend following trade idea: How to play the long term trend accelerating lower

Barry Weinstein Volatility Markets Newswire

Introduction

VolatilityMarkets Trend Following Trade.

According to AQR the quantitative hedge fund and Yale University, over the past 100 years markets moved in trends. Trends are successive upwards and downwards movements in price that occur at a greater frequency than would be predicted by randomness alone. The following trade idea is a trend following trade idea which takes the assumption that the market will continue moving in the way it has over the previous sessions. Trend Trading, however is different than scalping due to the time horizon of the trade as trend following trades will take a week while scalping is done on a daily or intraday basis.

Market Summary

Price

EURCHF last price was € 0.983151.

Trend analysis

In the short term EURCHF has been accelerating higher. In the long term EURCHF has been accelerating lower.

Value analysis

Over the past 20 days, the EURCHF price increased 6 days and decreased 14 days.

For every up day, there were 2.33 down days.

The average return on days where the price increased is 0.4038%

The average return on days where the price decreased is -0.2626%

Performance

Over the past 20 Days, the price has decreased by -1.26% percent.

Over the past 20 days, the average return per day has been -0.063% percent.

Trade idea

Taking into account the long term trend accelerating lower, we propose a short trade idea with time horizon.

Trend trade idea

Sell € 266,068 EUR, or 2.66 lots of EURCHF, take profit at € 0.9768 level for a € 1,710 EUR gain, stop out at € 0.9891 for a € 1,000 EUR loss through a one Week time horizon

Intraday predictions

EUR/CHF trend analysis

EURCHF last price was € 0.983151. The long term trend accelerating lower is stronger than the short term trend accelerating higher. This trade goes short when the price was moving lower and accelerating over the past 20 days.

EUR/CHF value analysis

Over the past 20 days, the EURCHF price increased 6 days and decreased 14 days. For every up day, there were 2.33 down days. The average return on days where the price increased is 0.4038% The average return on days where the price decreased is -0.2626% Over the past 20 Days, the price has decreased by -1.26% percent. Over the past 20 days, the average return per day has been -0.063% percent.

EUR/CHF worst/best case scenario analysis

Within 1 week, our worst case scenario where we are 95% certain that this level won't trade for EURCHF, is € 0.96572 , and the best case scenario overnight is € 1.000582 . levels outside of this range are unlikely, but still possible, to trade. We are 50% confident that € 0.9891 could trade and that € 0.9768 could trade. These levels are within statistical probability.

Expected range

We are 50% confident that € 0.9891 could trade and that € 0.9768 could trade. These levels are within statistical probability.

Probability Vs Payout Chart:

This graph contrasts the percentage payout of holding a position vs the probability that the payout occurs. The red and green columns represent the probability of stopping out and taking profit and their associated payouts.

Key Takeaways:

Price today € 0.983151.
Over the past 20 days, the EURCHF price increased 6 days and decreased 14 Days.
For every up day, there were 2.33 down days.
The average return on days where the price increased is 0.4038%.
The average return on days where the price decreased is -0.2626%.
Over the past 20 Days, the price has decreased by -1.26% percent.
Over the past 20 days, the average return per day has been -0.063% percent.
Over the past 20 days, The price has on average been accelerating: 0.6368 pips per day lower.
Over the last session, the price increased by 15.01 pips.
Over the last session, the price increased by 0.1527 %.
Over the last session, the price accelerated by 1.27 pips.

Author

Barry Weinstein

Volatility Markets Newswire

Barry Weinstein was a forex derivatives trader at BlueCrest Capital which was one of the largest hedge funds in Europe and then joined Credit Suisse where he assisted in running one of the largest FX Options portfolios in Europe.

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