Aaron
Lynch

Following on from last week's article I thought it important to step through some fantastic recent trades on the currency futures market. I highlighted the unique relationship between two major currencies the Swiss Franc and the US Dollar. As currencies can trend quite strongly they represent great trading opportunities, as these currencies exhibit an inverse relationship (as one goes up the other generally goes down). When a long trade presented itself on the US dollar I suspected a short trade on the Swiss Franc couldn't be too far away.

The entry signal for these trades were triggered by using ABC points, those familiar with Safety in the Market will be able to identify the methodology here, however, there is a slight variation and they were signalled on a 2 day swing chart. The 2 day swing chart can be used to great advantage in the currency market as it removes "noise" that can be associated with other chart types.

The long entry into the US dollar trade was signaled on the 3/7/03 at 94.86. This came after the inside day on the 2/7/03, understanding our inside day rule we can lower our entry point to the top of the inside day rather than the high of the point C day.

Managing our stops using the Swiss Franc Style of stop as taught in the Starter Pack, we would have managed our exit to 97.63. This represents the safe exit target at the 100% milestone. This totalled a profit of 2.77 cents, the futures contract is worth $1000 US per one cent movement, a potential profit of $US 2770 per contract.



click chart for more detail

Focusing now on the Swiss Franc contract at the corresponding time a short trade was signaled on the 7/7/03 using a 2-day swing chart again. The short entry price was 0.7388 and managing the trade using a stop one full milestone behind the market (Swiss franc style) saw an exit at the 50% milestone or 0.728. This translates to a potential profit of 1.08 cents or at $1250 US per one cent movement, a $1350 US profit on one contract.



click chart for more detail

The time frames of both these trades are interesting to note. The trades were both entered within 4 calendar days, there was a weekend in between them. The exits were both signaled on the 16/7/03, with time in the trades being 9 and 8 trading days respectively. Combining the potential profit for both trades, a $4120 US result was possible on 1 contract per trade.

Finally as with any new markets you might be interested in trading, an understanding of the contract specifications is vitally important. These can in most cases be downloaded from the relevant exchanges website to understand the contracts value and its relevant contract months. Having access to the price data is also required. Hubb can provide this data through its World Futures Markets download.

Good Trading

Aaron Lynch