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TRADING STRATEGY by Christian Schürholz


FX


Volatility trading with the SwissBox strategy


Based on findings from gambling, more precisely Martingale, the SwissBox strategy comes close to beating the market with every trade, even over long periods of time with over 75% hit rate.


In statistics, a Martingale describes a fair stochastic process. In the stock market the process is better known as Random Walk. Traders go long into a stock and hope for a profit. If the price turns, they put twice as many lots of short. Until the profits offset the previous losses. A safe bet in the long


run: only until it is so far, it can become very expensive without a clear strategy.


Finding a range in the balance


Te setup is a classic breakout strategy, suitable for experienced traders as well as beginners. For this purpose, we define a range for the breakout in the respective market. In our morning opening trade with the SwissBox, we bet on a 15 point box in the Dax and a profit target of 7.5 points in both


directions. If the chart breaks through the range upwards, a pending buy order is triggered. In the opposite case, the pending short order takes effect. If the trade now runs directly into profit, we are out and take the profit with us.


However, the strategy only unfolds its full potential in so called fake-outs. Te price leaves the range, but does reach the previously defined profit target of 7.5 points. Te trend reverses and breaks out on the other side. Te breakout


in the opposite direction FX TRADER MAGAZINE October - December 2018 35


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