Trade Example: How to trade the US/China Trade War

In this article and video we're going to look at another trade example that shows how the Financial Source terminal pays for its own subscription through the trades it generates that you can very simply predict, once you know what you're looking for.
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In this article / video we’re going to look at another trade example that shows how the Financial Source terminal pays for its own subscription through the trades it generates that you can very simply predict, once you know what you’re looking for.

The trade we’re going to look at is a short trade on the USDCHF currency pair.  The first thing we need to do before we can find trades like this is go to the Financial Source Terminal and make sure we have the current baseline for the two currencies.

In the Financial Source Terminal in the ‘Market Insights’ section we had a note on the 23rd of August about the currency driver’s report.  There were different things moving the currencies and one of the big ones was risk on risk off Safe Haven plays.

Now by looking at the Swiss Franc specifically, we saw very simply that the Swiss Franc was a pure Safe Haven play. If the market is risk off, look for the Swiss Franc to rally.

If not, then look for it to sell off. The currency was not moving based on economic data or central bank expectations.

This is because of the SNB doesn’t really do much on policy. So, this Swiss Franc is a risk on, risk off mover. Now what happened in this specific trade example?

This update on the 23rd of August on the Swiss Franc was sent on the terminal at about 9:00 AM London time. Now, if we come back a little bit later on to 13:17, we had an important market update. It said there’s a distinct risk off tone set into the market following news that China will retaliate to US tariffs in kind.

So, what does that mean? Remember, if risk sentiment goes risk-off, we want to be buying the Swiss Franc. That means, in this specific example, we could buy the Swiss Franc, and sell the US dollar.

After the announcement was made, you had about half an hour to digest this information and realize that the markets turned risk off. If you consider the headline, it was pretty obvious.

It was basically telling us that the market was risk-off and that we should be looking for opportunities to sell USDCHF. In the video example we saw that the move played out and the price fell well over a hundred pips towards the end of Friday’s session on that very simple move.

From this example you can see that these moves are very predictable because you already know the context, you already know the baseline. You know what you’re waiting for, and then when that thing happens, you know how to trade it.

And that’s exactly how this move played out on the USDCHF. So, if you’re looking to improve your trading results, if you want to really get to grips with trading the fundamentals and be able to predict these moves in advance and then understand how to react when they do happen, checkout Financial Source.

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