Fundamental analysis Macroeconomic indicators Trading on the news

Is Trading on Rollbacks Effective? Part 5. Switzerland

Elena Berseneva 22 june 2022 18

Previous studies of rollback trading have revealed the usefulness of this strategy for a number of economic events in four countries. Let's see if trading on rollbacks is suitable for Swiss events.

Hypothesis
To conclusion

A positive change in the newly published economic indicator compared to the value for the previous period forms a trading signal for a growth in the quote of a financial instrument. A negative change in the indicator, in turn, generates a signal to reduce the quote.


Trading on rollbacks is profitable for Swiss events.

To conclusion

Recall the trading strategy:

 

If the current value of the indicator is greater than the previous one, then an order is placed

 

BuyLimit = Open1 – k*Open1

 


If the current value of the indicator is less than the previous one, then an order is placed

 

SellLimit = Open1 + k*Open1

 


where k is the percentage of rollback from the opening price at the time of the publication of the Open1 indicator, 

 

k = 0,05; 0,1; 0,15; 0,2; 0,25; 0,3.

 


We wait for 8 hours. If the pending order has not worked, we cancel it.

 


Closing a position:

 

  1. on close 4, 8, 12, 16, 20, 32 of candlesticks after entering the market;
  2. by order TakeProfit (TP):

 

for buying:

  • ТР (1) = BuyLimit * (1 + k)
  • ТР (1,5) = BuyLimit * (1 + 1,5*k)
  • ТР (2) = BuyLimit * (1 + 2*k)
  • ТР (2,5) = BuyLimit * (1 + 2,5*k)
  • ТР (3) = BuyLimit * (1 + 3*k)


for selling:

  • ТР (1) = SellLimit * (1 - k)
  • ТР (1,5) = SellLimit * (1 - 1,5*k)
  • ТР (2) = SellLimit * (1 - 2*k)
  • ТР (2,5) = SellLimit * (1 - 2,5*k)
  • ТР (3) = SellLimit * (1 - 3*k)


If TakeProfit has not worked within 8 hours after the publication of the indicator, then we close the position ourselves at the end of these 8 hours.

 

A total of 66 entry/exit combinations.

Data used

Economic calendar: MarketCheese


Timeframe: 15 minutes (M15)


Historical data: 01/01/2015 – 09/30/2020


Country Switzerland: 9 events, including 6 important ones (detailed list is in the appendix)


5 currency pairs with CHF have been taken as financial instruments:

  • AUDCHF
  • EURCHF
  • GBPCHF
  • NZDCHF
  • USDCHF


A total of 4,081 market entries


Analysis of the obtained results 


Closing a position on close 4, 8, 12, 16, 20, 32 of candlestick after entering the market

 

We will evaluate the results according to the following criteria:

  • The rate of return reflects the relative change in the quotations of financial instruments in percentage. A positive value of the rate of return indicates the profitability of the strategy, negative - about the loss.


Let's accept the notations for combinations of entry and exit from the market by the number of the candlestick:


Exit \ Entry
0 – pending order
4
0-4
8
0-8
12
0-12
16
0-16
20
0-20
32
0-32


Candlestick 4 - exit from the market an hour after the entry.

 

Candlestick 8 - exit from the market 2 hours after the entry, and so on.

 


The results are presented in diagrams:

The rate of return of the rollback trading strategy both for all events in Switzerland and for a group of important events does not reach a significant value of 0.09% modulo and ranges from -0.032% to 0.051%.

 

Let's see which of the events and at what combination of the percentage of rollback and exit from the market have shown a rate of return close to 0.09% and higher:

 


k = 0,05 %


Event
The best Entry - Exit
Rate of return of the best Entry - Exit
Number of entries
Trade Balance
0--32
0,248
163
SECO Consumer Climate
0--32
0,162
59
CPI (MoM)
0--32
0,132
133
GDP (YoY)
0--32
0,128
49
ZEW Expectations
0--20
0,087
154



k = 0,1 %


Event
The best Entry - Exit
Rate of return of the best Entry - Exit
Number of entries
Trade Balance
0--32
0,227
130
SECO Consumer Climate
0--32
0,151
53
GDP (YoY)
0--32
0,133
39



k = 0,15 %


Event
The best Entry - Exit
Rate of return of the best Entry - Exit
Number of entries
SECO Consumer Climate
0--20
0,163
38
Trade Balance
0--20
0,138
111
CPI (MoM)
0--20
0,124
95
GDP (YoY)
0--32
0,118
31
CPI (YoY)
0--16
0,088
89



k = 0,2 %


Event
The best Entry - Exit
Rate of return of the best Entry - Exit
Number of entries
GDP (YoY)
0--32
0,223
26
SECO Consumer Climate
0--20
0,189
33
Trade Balance
0--20
0,156
89
CPI (MoM)
0--20
0,127
69
CPI (YoY)
0--16
0,107
76



k = 0,25 %


Event
The best Entry - Exit
Rate of return of the best Entry - Exit
Number of entries
GDP (YoY)
0--32
0,293
19
Trade Balance
0--20
0,183
73
CPI (MoM)
0--16
0,145
59
CPI (YoY)
0--12
0,139
66



k = 0,3 %


Event
The best Entry - Exit
Rate of return of the best Entry - Exit
Number of entries
CPI (YoY)
0--8
0,232
56
GDP (YoY)
0--32
0,198
13
CPI (MoM)
0--16
0,131
40



The following events have shown a significant rate of return:

  • Trade Balance – with a rollback percentage of 0.05 and 0.1 and exit from the market 8 hours after entry; with a rollback percentage from 0.15 to 0.25 and exit from the market 5 hours after entry.
  • SECO Consumer Climate – with a rollback percentage of 0.05 and 0.1 and exit from the market 8 hours after entry; with a rollback percentage of 0.15 and 0.2 and exit from the market 5 hours after entry.
  • GDP (YoY) – for any rollback and exit from the market 8 hours after entry.
  • ZEW Expectations – only with a small rollback of 0.05 and exit from the market 5 hours after entry.
  • CPI (MoM) – with a rollback percentage of 0.05 and exit from the market 8 hours after entry; with a rollback percentage of 0.15 and 0.2 and exit from the market 5 hours after entry; with a rollback percentage of 0.25 and 0.3 and exit from the market 4 hours after entry.
  • CPI (YoY) – with a rollback percentage of 0.15 and 0.2 and exit from the market 4 hours after entry; with a rollback percentage of 0.25 and exit from the market 3 hours after entry; with a rollback percentage of 0.3 and exit from the market 2 hours after entry.


At the same time, in most cases, with a growth in the rollback percentage, the rate of return also increases.

 

These events are worth paying attention to.



 

Closing a position on a TakeProfit order

 

The Take Profit orders are placed because there is a possibility that, having rolled back after the publication of the event, the price will return to the opening level.

 

We will evaluate the results according to three criteria:

  • The rate of return reflects the relative change in the quotations of financial instruments in percentage. A positive value of the rate of return indicates the profitability of the strategy, negative - about the loss.
  • % TP - the probability of triggering a Take Profit order, %
  • SPP - share of profitable positions, %

 


The results are presented in diagrams: 

In the first part of our study of trading on rollbacks when exiting the market on a TakeProfit order, we have settled on a rollback percentage of k = 0.1 and Take Profit coefficients: TP = 1.5 and TP = 2.

 

The rollback percentage of 0.1% has been chosen due to higher rate of return, the probability of triggering Take Profit orders and the share of profitable positions.

 

Similarly, Take Profit (TP) coefficients equal to 1.5 and 2 have been chosen.

 

The rollback percentage of 0.05 has been excluded from consideration due to the widening spread at the time of the publication of events, the delay in reflecting data in the economic calendar, and, as a result, the low rate of return of the strategy.

 

For the coefficient TP = 1, the following has been observed.

 

After the publication of events, the price may roll back in the direction opposite to the economic meaning of the published events. However, within the next 8 hours, it tends to return to the opening price at the time of the publication of events. And the lower the price rollback percentage, the more likely such a result is.

 

The results of events in Switzerland confirm these findings.

 

A significant rate of return for the selected parameters will also be considered a rate of return of 0.04% or more.

 

Let's see for which of the events in Switzerland the effectiveness of rollback trading has been identified.

Let's summarize.

 

The model of trading on rollbacks and exiting the market 8 hours after entry is suitable for the following events:

  • Trade Balance;
  • SECO Consumer Climate;
  • CPI (MoM);
  • GDP (YoY).


The model of trading on rollbacks and exiting the market 5 hours after entry is suitable for the events:

  • ZEW Expectations;
  • SECO Consumer Climate;
  • Trade Balance;
  • CPI (MoM).

 

The model of trading on rollbacks and exiting the market 4 hours after entry is suitable for the events:

  • CPI (YoY);
  • CPI (MoM).

 

The model of trading on rollbacks and exiting the market 3 hours after entry is suitable for the event:

  • CPI (YoY).


The model of trading on rollbacks and exiting the market 2 hours after entry is suitable for the event:

  • CPI (YoY).

 


The model of trading on rollbacks and exiting the market on a Take Profit order is suitable for the following events in Switzerland:

 

1. Important events:

  • Retail Sales (YoY);
  • CPI (YoY);
  • GDP (YoY);
  • Trade Balance.

 

2. Consumption and inflation:

  • Retail Sales (YoY);
  • CPI (YoY);
  • CPI (MoM).

 

3. Business and confidence:

  • ZEW Expectations.

 


The model of trading on rollbacks and exiting the market on a Take Profit order is not suitable for the following events in Switzerland, which belong to the group of important ones:

  • KOF Leading Indicators;
  • Unemployment Rate s.a. (MoM).


It has not yet been possible to assess the effectiveness of trading on rollbacks of such an important event as the “SNB Interest Rate Decision” since it has never changed in the period under consideration.

Conclusion

After the publication of events, the price may roll back in the direction opposite to the economic meaning of the published events. However, during the next 8 hours, it tends to return to the opening price at the time of the publication of events. And the lower the price rollback percentage, the more likely such a result is.


The effectiveness of rollback trading for events in Switzerland has been revealed.


Detailed results are shown in the Appendix:

XLSX (0.12 MB)Trading on Rollbacks Switzerland.xlsx



See also:

Is trading on rollbacks effective? Part 1. USA

Is trading on rollbacks effective? Part 2. Australia

Is trading on rollbacks effective? Part 3. Eurozone

Is trading on rollbacks effective? Part 4. Great Britain

Is trading on rollbacks effective? Part 6. Japan

Is Trading on Rollbacks Effective? Part 7. New Zealand

Is Trading on Rollbacks Effective? Part 8. Canada

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