CAD/CHF is a currency pair where two currencies, namely, the Canadian dollar and the Swiss franc, are involved. It is a cross-currency pair. Here, CAD is called the based currency, and CHF is called the quote currency.
The current market price of CADCHF tells the value of CHF equivalent to one CAD. It is represented as 1 CAD per X CHF. For example, if the value of CADCHF in the market is 0.7372, then one must pay 0.7372 Swiss francs to buy one Canadian dollar.
In simple terms, the spread is the difference between the bid price and the ask price set by the brokers. It is not a fixed value and differs from time to time and broker to broker. It also varies based on the type of execution model.
ECN: 1 | STP: 2
The fee is the commission that is levied by the broker on each trade a trader takes. This, too, like the spread, differs from broker to broker and the type of their execution model. Fee on ECN accounts is 6-10 pips, while it is nil on STP accounts.
Slippage is the difference between the trader’s executed price and the price he actually received from the broker. There is always this difference due to the volatility of the market and the broker’s trade execution speed. Note that slippage only happens on market orders.
Trading Range in CAD/CHF
Apart from analyzing the direction of the market, one must predetermine their risk and reward based on the volatility and the timeframe. Knowing how much a trader will gain or lose in a given time frame is a vital trade management tool. And below is a table through which one can determine their profit/loss that can be made in a specified timeframe. For example, the average pip movement on the 1H timeframe is 6.8. So, a trader can expect to be in a profit of $68.34 or in a loss of the same amount.
Procedure to assess Pip Ranges
- Add the ATR indicator to your chart
- Set the period to 1
- Add a 200-period SMA to this indicator
- Shrink the chart so you can assess a large time period
- Select your desired timeframe
- Measure the floor level and set this value as the min
- Measure the level of the 200-period SMA and set this as the average
- Measure the peak levels and set this as Max.
CAD/CHF Cost as a Percent of the Trading Range
An application to the above volatility table is to find the cost differences on trades by considering the volatility and the total cost on a trade. Below is the table that illustrates the variation in cost on a trade, in terms of percentage. The comprehension of it is discussed in the subsequent topic.
ECN Model Account
Spread = 1 | Slippage = 2 |Trading fee = 1
Total cost = Slippage + Spread + Trading Fee = 2 + 1 + 1 = 4
STP Model Account
Spread = 2 | Slippage = 2 | Trading fee = 0
Total cost = Slippage + Spread + Trading Fee = 2 + 2 + 0 = 2
The Ideal way to trade the CAD/CHF
The higher the magnitude of the percentage, the higher is the cost of the trade.
The values in the table are least in the min column and highest in the max column. This simply means that the costs are high when the volatility of the market is low and vice versa.
In the average column, the values are not as low as in the max column, and not as high as in the max column. The volatility here is moderate too. Hence, this becomes our ideal time of the day to trade in the market.
To sum it up, one must trade during those times of the day when the volatility is more or less near the average values. This will ensure decent volatility as well as minimal costs.
There is another simple technique to reduce costs on trade. When trades are executed using limit order instead of market orders, the slippage becomes nil. So, this brings down the total cost of the trade by a significant value.