EURGBP with a target price 0.8580

This week according to our weekly EUR and Great Britain Pound prediction we are looking to Sell EURGBP with a target price 0.8580 and a probability of 79.2%

We constantly try to warn traders in our posts about the need to hedge the trades, because trading one currency at the time we consider as gambling. This weeks pair is great to hedge other pairs that involve US dollar. Since the political mess in US is nowhere near ending we need to adapt to it and take some actions that our portfolio would be safe.

Normally, there are some math involved in our hedging strategy. For example we like to compare currencies using their cosine similarity and look out for the most orthogonal currencies to trade. But as we cannot take into account political and economical events and they became very aggressive these days - diversification with currencies that are less dependant on US Dollar is an option too.

Now let's take a closer look at the prediction:

Normality - we often look for histograms that are close to normal distributions because they have better correlations with probabilities. From this point of view - this weeks EURGBP prediction doesn’t look very good, since both blue and yellow distributions have some flaws - blue histogram has its mode stand out a bit too much, and a yellow one looks bimodal.

Modes - they are the rows with the most predictions. If they are close to current price and are in normal weekly currency trading range we often place take profit on them. We need to be careful since the normality of both histograms are questionable, so we decided to place take profit quite close to the current price and using probability as the major indicator only.

Standard deviation - the bigger it is, the less certain the algorithm is. But one doesn’t need to count it manually, you can simply look at the difference between rows. 20 pips is great, while 60 pips is a bit too much. So again, we see how risky this trade is.

Hope this trade will help you escape some political madness with currencies involving US Dollar. For more daily or weekly predictions - take a look at Evolize.

Detail guide of how to use Evolize predictions to your advantage is here.