After the announcement of QE-ternity from the ECB on September 12, while financial markets found some rest in the trade dispute between the US and China, the EURCHF traded back above 1.1000.
Still, technically the currency pair finds itself in a bearish mode on a daily chart with a potential short trigger around 1.1170/1200.
With that in mind, an upcoming seasonal bearish pattern in EURCHF looks very interesting.
This pattern has developed over the last 24 years between November 6 through November 12, and it delivers a chance for us to formulate an idea how to possibly trade the EURCHF.
Seasonal patterns in the EURCHF
The key parameter of this seasonal bearish pattern is as follows: between November 6 and November 12, EURCHF saw an average drop of 61 pips for 19 of the past 24 years.
In the remaining five years, it gained on average only 15 pips, with the maximum loss and maximum drawdown being 38 pips.
How to trade the Seasonal Pattern: EURCHF
And now the key question: how could we trade this?
Here's the plan:
- After identifying the profitable seasonal window, sell EURCHF on the closing price of the starting date on November 6 (21:59 CET).
- Identify the maximum loss within the seasonal period. Then, have a look at the daily chart and the ATR(14) indicator.
- If the maximum loss is above the ATR(14) reading, round it up to the next round number and use it as worst-case-stop.
- If the maximum loss is below the ATR(14) reading, use the ATR(14) as your stop-width (rounded up to the next round number).
- Look at the average gain of the seasonal pattern, and place the take profit at this distance from your entry point.
- If the trade is not stopped out or it does not reach its take profit within the seasonal period, end the trade market on the closing price on November 12.
Looking at current market data, since the ATR(14) in EURCHF on a daily time frame is currently trading around 45 pips and the maximum loss of the window being 38 pips, our worst-case stop will be placed based on the ATR(14) 45 pips away from our entry price.
Meanwhile, the average gain of the seasonal pattern is 61 pips within this period. So, after entering the trade on the closing price of November 6, we would subtract 61 pips to get our take profit level.
Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of the EURCHF fell by 11.9%, in 2015, it fell by 10.2%, in 2016 it fell by 3.2%, in 2017 it increased by 13.92%, 2018 it fell by 4.4%, meaning that after five years, it was down by 16.5%.
Check out Admiral Markets' most competitive conditions on EURCHF and start trading from as low as 3 ticks. To test Admiral Markets EURCHF offering in combination with the described strategy above register for a free demo account today and experience the live market risk free!
Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
- Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
- To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
- The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
- Any kind of previous or modeled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.