How to trade after it gained a whopping 15% last week
After something dubbed “the forex event of the year”, we examine in more detail what happens next for the Swiss franc and how things have changed.
Here is a recap of the announcement and its aftermath and why it will impact a wide array of participants in the market.
What can definitely be expected is more volume in the coming weeks. Although there is no official data for it and you can’t see it, it is there. This will make for sharper and steeper moves in the coming weeks. Just like the ones these guys are doing.
We mustn’t forget that even without the Swiss National Bank’s decision, there was already heightened tension in the markets with everything going on with the Russian rouble and the grim reports surrounding the Eurozone economies.
Because of this, next Thursday will be a crucial day for both the franc and the euro. The European Central Bank and its president Mario Draghi will be holding a press conference and will explain if they will be starting any Quantitative Easing (QE). The significance of this is that if it is enough it might jumpstart the European economy and provide more political stability among the waning support for the European project.
Given that Switzerland is surrounded by EU countries and that the largest portion of the franc’s physical trading is with the euro, this will be vital for any new developments for the currency.
So what should you look out for? The answer to this has two versions, the first one is for traders with little or no experience. If you’re one of them, you actually have an advantage, as this is not a regular situation and you’re not burdened with the usual pace of the market, which has gone out the window and won’t come back for at least several weeks. If you follow closely how the pair moves, you might find some openings in both directions as the moves will have more pips and allow more room for entry and exits.
If you do have some experience, be mindful of the irregularity of the situation and some trading techniques might not work. Trading styles get distorted in exactly this type of situation and if you add a stubbornness or inability to adapt, you might register a significant loss. Just like we mentioned in our article discussing oil several weeks ago, this is the markets on steroids. The price levels are far more susceptible to any news, more so to a major announcement like the one next Thursday.
In any case, the usual way the EUR/CHF and USD/CHF behave will be different in the near future with more peaks and troughs. Keep your focus or risk experiencing what he did.