Swiss Franc Weakens As Predicted

On August 9th, the day US Federal Reserve decided to keep the short-term rates at the current low rate (ZIRP - Zero interest rate policy)until mid-2013, the market had a violnet reaction for a very brief period. The markets did not see the extension of easy monetary policy in that announcement, as it was expecting a new round of QE. When there was no hint of that, the market ignored the historic announcement of ZIRP with a "time-bound" element to it. For few minutes the market was extremely negative and that's when the EUR/CHF LONG opportunity presented itself. The pair reached its low of 1.0088! But, in my blog on that very same day (prior to the FED announcement) I had predicted the "imminent" SNB intervention and subsequent weakening of the CHF from 1.05 to 1.15. After a brief violence to the downside, the markets violently reversed and finished 400+ DOW points higher for the day! Safe-haven currencies got hammered, "Risk-on" trade was in full force until the end of the US session.

What I want to convey today is that, the prediction came true. EUR/CHF pair hit 1.15 yesterday. So, those who managed to stick with the call made 1000 pips in a matter of 4 days! An amazing move and opportunity to make money. Even an investment of $2,000, which gives a leverage of taking a $100,000 position (considering margin requirements, for this pair, it could have been slightly higher), and in this case EUR 100,000 would have resulted in a profit of approximately $13,500! That's almost 600% profit in 4 days!

These are extraordinary times in the financial markets and especially, the currency markets are witnessing historic fluctuations on day-to-day basis. Traders have to display a high level of agility in terms of moving with the headlines. Moreover, it's about anticipation of new information from various sources, and in this case, I was very much tuned to what was going on with SNB, as CHF got stronger across the board. I relaized that there are serious consequences to Swiss economy and its export sector, if the Swiss currency continued to get the push due to European and US problems. Swiss authorities had to send a market signal to stem the tide. It happened, as anticipated.

Market presents these opportunities and a trader has to be always ready to grab them. It's a combination of mental focus, market knowledge, agility with which the trades are made, acute awareness of risk tolerance and respect for the market wisdom. Market is always right; trader can only hop between probabilities. Trader should know how to mentally assign a probability to a trade going in his direction based on funadmentals prevailing at the time, market mood, techincal indicators and potential new information that could alter the trade dynamics. If things go against despite all calculations and analysis, then it is imperative that trader sticks to her risk parameters and gets out of that trade. Once again, MARKET IS ALWAYS RIGHT!