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Basics Of Trading The AUD/CHF Currency Pair & Analyzing The Trading Costs Involved

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Introduction

AUDCHF is the abbreviation for the Australian dollar and the Swiss franc. It is a cross-currency pair in the market. AUD being on the left is the base currency, and CHF (on the right) is the quote currency. One can expect high volatility and liquidity during the Australian session.

Understanding AUD/CHF

The value of AUDCHF represents the amount of Swiss Francs required to buy one Australian dollar. It is quoted as 1 AUD per X CHF. For example, if the value of AUDCHF is 0.6885, then this number represents the CHF that is to be produced by the trader to buy one AUD.

AUD/CHF Specification

Spread

Spread is the difference between the bid price and the ask price of the market set by the brokers. It is not a fixed value. It differs from the account type as well as the broker.

ECN: 0.7 | STP: 1.7

Fees

Brokers charge a fee on every trade a trader takes. It could be per execution or finished trade (round trip). Also, it varies from the type of account model. Typically, fee on ECN type is 5-10 pips, and 0 on STP type.

Slippage

Slippage is the difference between the price demanded by the trader and the price he actually received from the broker. There is always a variation in this due to the broker’s execution speed and market volatility.

Trading Range in AUD/CHF

Wanting to know how much profit one can make in a given time? If so, then you may find the answer in the table illustrated below. This table is the representation of the min, average, and max volatility of the currency pair in different timeframes. And with these values in the table, one can determine the profit on a trade.

Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can determine a significant period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

AUD/CHF Cost as a Percent of the Trading Range

The cost as a percent of the trading range is determined in the following table using different volatilities, assuming that the trading range can be seen as the potential profit on a given timeframe. The percentages are obtained by finding the ratio between the total cost of the trade and the range values. These values, thus, help in assessing the right moments in the day to trade the currency pair.

ECN Model Account

Spread = 0.7 | Slippage = 2 |Trading fee = 1

Total cost = Slippage + Spread + Trading Fee = 2 + 0.7 + 1 = 3.7

STP Model Account

Spread = 1.7 | Slippage = 2 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 2 + 1.7 + 0 = 3.7

The Ideal way to trade the AUD/CHF

Firstly, the higher the value of the percentage, the higher is the cost of the trade. It is pretty evident from the above tables that the costs are higher in the min column and keep decreasing in the subsequent columns. Meaning, as the volatility increases, the total cost of the trade reduces. But, it is not ideal to trade in either of the extremes. To have an affordable cost and optimal volatility, it is best to enter during those times of the day when the pip movement for the pair is more or less equal to the average values.

Furthermore, the total cost can easily be reduced by trading using limit order instead of market orders. This methodology would bring down the slippage to zero. Hence, significantly affecting the percentage values. And an example of the same is depicted below.

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