Euro Futures Trading Strategy – Backtest
The Euro is the European Union’s currency and is represented with the € symbol. Since the introduction of the currency in 1999, the Euro FX futures has grown to become one of the most actively traded contracts in FX futures, as the currency is often used in international transactions. The Euro is the second most-held reserve currency in the world. Looking for a Euro FX futures strategy? Here is Euro FX futures explained.
The Euro futures strategy refers to the methodologies and techniques for trading Euro Fx futures contracts. Euro FX futures are currency futures contracts in which the underlying asset is the Euro. The pricing is based on the Euro’s expected future exchange rate against the US dollar, and it is settled by the physical delivery of the specified amount of Euros on expiry.
This post answers some questions about the Euro FX futures strategy. We also provide you with a backtest of an Euro FX futures strategy.
What are Euro futures?
Euro FX futures are currency futures contracts with the Euro as the underlying asset. It is an exchange-traded contract that represents an agreement to receive or deliver the specified amount of euros at an agreed-upon exchange rate on a future date. Like other futures contracts, the Euro FX futures contract is a leveraged instrument. As a result, a trader only needs to deposit a portion of the contract’s total value.
Euro Futures are priced based on the expected future exchange rate of the Euro against the US dollar. The contract is settled by delivery of the underlying. This contract allows traders to take a position on the value of the Euro against the USD, either for speculative purposes, hedging against exchange rate risks, or portfolio diversification.
Related: Futures strategies for sale
What is a Euro FX futures strategy?
This refers to the methodologies and techniques for trading this futures contract to make profits. It includes the traders’ strategies for market timing, leverage and position sizing, risk management, and other trade management techniques.
It is important to have a robust trading strategy if you want to trade futures with any success. The strategy must have precise entry and exit signals, as well as risk management parameters.
Euro FX futures strategy backtest
A backtest with strict trading rules, settings, statistics, and historical performance is coming soon.
What is the seasonality of Euro futures?
In financial trading, seasonality refers to the tendency of a security’s price to move in a fairly predictable way during certain periods of the year. In most cases, the periods we refer to are the various months of the year.
The Euro has been noted to perform better against the USD during the months of October and December. January often experiences a steep fall in the price of the Euro as people buy up the USD following the end of the Christmas holidays. The Euro performs poorly during the months of February, March, and June, as you can see in the chart below:
What moves the Euro FX — What affects the Euro FX the most?
Economic reports and political events are the most common factors that affect the movement of the Euro against the US dollar. Some of the economic reports with the most significant effects on the movement of the Euro FX include interest rates and policy statements, inflation-focused reports, Growth reports, balance of payments reports, and more. Important political events, such as elections, have significant effects on the Euro FX futures.
How are Euro futures traded?
The Chicago Mercantile Exchange (CME) Group and the Eurex Exchange trade Euro FX futures contracts. The contract can be traded from anywhere in the world via the CME Globex electronic trading platforms from 5:00 p.m. CT to 4:00 p.m. CT the following day, with a one-hour break each day.
One Euro futures full contract settles for 125,000 euros on the CME platform. The price quotation is in US dollars per Euro to five decimal places. Aside from the full contract, the CME also offers mini and micro contracts for Euro FX futures. The Euro FX mini contract is worth 62,500 euros, and the micro contract is worth 12,500 euros. Quarterly contracts (March, June, September, and December) are listed for 20 consecutive quarters, and serial contracts are listed for three consecutive months for full contracts.
Trading closes at 9:16 a.m. CT on the second business day following the third Wednesday of the contract month (usually Monday). If the specified termination date falls on a bank holiday in Chicago or New York City, trading will be suspended on the next preceding business day, common to Chicago and New York City banks and the Exchange.
The contract is settled at expiration by physical delivery of the euros, which is usually done on the third Wednesday of the expiring month. If that day is a bank holiday in either Chicago or New York City, or if it is not a business day in the country of delivery, the delivery will be made on the next business day in the country of delivery that is not a bank holiday in either Chicago or New York City.
How do you start trading Euro FX futures?
The contract is traded through a futures broker, who can grant you access to the exchange and also help to clear your trades. So, to begin trading, you must first open an account with a futures broker and fund it.
You can also trade futures contracts CFDs with an online CFD broker like IG. A contract for difference (CFD) is an agreement to exchange the price difference between the opening and closing of a trade. It allows you to trade price fluctuations without dealing with the delivery issues associated with direct futures trading. If you can trust a CFD broker, you may want to give it a try.
What is the Euro FX trading at?
As of December 1st, 2022, the Euro futures were trading at $1.05160 per Euro. See the chart here on the CME platform chart. The chart was retrieved from TradingView.
Note that the price changes from time to time, so what is quoted here may not be the price it would be trading when you are reading this post. You can click on any of the links to get the real-time price on the CME platform chart or directly from TradingView.
What’s Euro FX futures hour?
The Euro futures trades on the CME Globex electronic platform from Sundays to Fridays from 5:00 p.m. to 4:00 p.m. CT the next day. As each trading day ends by 4:00 p.m., there is a one-hour break before the start of the next trading day.
For CME ClearPort, the schedule is Sunday – Friday, 5:00 p.m. – 4:15 p.m. CT. There is a 45–minute break each day beginning at 4:15 p.m.
Where can I find trading charts?
You can find the trading chart on any trading platform you are using if it offers direct chart services. If your platform does offer charts, you can subscribe to trading charts via a third-party platform, such as MultiCharts.
A more common option is TradingView, which offers free access to charts of different instruments. However, you must subscribe to the Pro services to connect to your broker.
You can also access the chart of the Euro FX futures via the CME platform chart.
What are the trading symbols for Euro futures?
The trading symbol for the full contract is 6EZ2, while the symbol for the micro contract is M6EZ2. The CME ClearPort code is EC.
What is the specification for the Euro FX futures contract?
For the full Euro futures contract, one contract is equivalent to 125,000 euros. The minimum fluctuation on the CME Globex is as follows:
- Outright fluctuation — $0.00005 per euro increment or $6.25 per contract
- Consecutive months spread — $0.00001 per euro increment or $1.25 per contract
- All other spread combinations — $0.00002 per euro increment or $2.50 per contract
For CME ClearPort, the minimum fluctuation is 0.00001 per Euro increment = $1.25 per contract
There are twenty months listed contracts with quarterly cycles (Mar, Jun, Sep, Dec). Settlement is by delivery method, and the last trading day is two business days (usually Monday) immediately preceding the third Wednesday of the contract month.
Why should you start trading Euro FX futures?
One of the most common reasons for trading the Euro FX futures is speculation since the Euro FX Futures is one of the most liquid currency futures. Many traders also use the Euro FX Futures for hedging against exchange rate risks in the European markets.
Some traders may simultaneously buy and sell the Euro FX contracts on different platforms to benefit from any price imbalance. This is known as arbitrage trading.
What is the contract size?
For the full or standard contract size of the Euro FX futures, one contract is equivalent to 125,000 euros. The dollar value is gotten by multiplying with the dollar exchange rate. For example, with the EUR/USD exchange rate at 1.05160, as of writing, the dollar value of the full contract of the Euro future would be $132,000.
For the e-mini contract, one contract unit is 62,500 euros, which is equivalent to 62500 x 1.0516 = $65,725 at the current Euro rate. The contract size of the micro contract is 12,500 euros. So, at the current Euro rate, the dollar value would be 12,500 x 1.05160 = $13,200.
What is the tick size?
The tick size is the USD worth of the minimum fluctuation. The tick size of the full contract of the Euro futures is $6.25 per tick per contract. It is the same for the e-mini contract. For the micro contract size, the tick size is $1.25.
What is the minimum price fluctuation for Euro FX futures?
For outright fluctuation on the CME Globex, the minimum fluctuation is 0.00005 per Euro increment, which is equivalent $6.25 tick size per contract.
The consecutive months spread is 0.00001 per Euro increment ($1.25), while all other spread combinations use 0.00002 per Euro increment or $2.50 per contract.
Are there any ETFs?
Yes. There are many ETFs that track the Euro. Here are some of them:
- Invesco CurrencyShares Euro Trust
- ProShares UltraShort Euro
- ProShares Ultra Euro
What factors affect Euro FX prices?
The factors that affect the Euro FX prices include:
- Interest rates and policy statements
- Inflation-focused reports, such as the consumer price index and the producers’ price index
- Growth reports, such as the GDP, manufacturing PMI, services PMI, and retail sales
- Reports about the balance of payments, such as current account and trade balance reports
- Sentiment reports, such as the German Zew Economic Sentiment Index
- Important political events, such as elections
What is the all-time high for Euro FX futures?
According to the TradingView chart for Euro FX futures, the all-time high is 1.42065, which it reached in February 2018.
What are the biggest risks in trading Euro FX futures?
The biggest risk of trading futures, including Euro futures, is adverse price movements. Because it is a leveraged instrument, the losses are calculated using the actual value of the contract size traded, rather than the margin deposited. So, if you trade with a 10x leverage, a 1% negative movement results in a 10% loss in your account, and a 10% adverse move would wipe out your account.
What is the settlement method?
The settlement method is deliverable.
What is the settlement procedure?
The settlement procedure involves the physical delivery of Euro. But there are normal daily settlements until Rollover Date. CME Group staff determines the daily settlement of EUR/USD futures (6E) at 14:00 Central Time (CT) based on trading activity on CME Globex.
What is the block minimum for Euro FX futures?
150 contracts.
What is the difference between Euro FX futures and Forex for the European currency?
The key difference between the Euro FX futures and forex for the European currency is that the spot forex value for the Euro is determined in relation to the spot value of the USD, whereas the Euro futures is priced independently. Also, while the futures contracts have fixed expiration dates, the spot forex pair can be traded indefinitely.
Which forex pair is the same as Euro FX futures
EUR/USD
What are some important dates for this market?
The important dates include:
- 1999 when the Euro was created
- 2002 when new notes and coins were introduced
- 2009 when the Lisbon Treaty formalized the Eurogroup.
- 2018 when the Euro made its current all-time high
What is the highest Euro FX has ever been — its all-time high?
According to the TradingView chart for Euro FX futures, the highest level the Euro ever reached against the dollar was 1.42065, which happened in February 2018.
What is the lowest Euro FX has ever been — its all-time low?
According to the TradingView chart for Euro FX futures, the lowest level the Euro ever dropped against the dollar was 0.95925, which happened in September 2022.
Conclusion
Regardless of the reason — speculation or hedging against exchange rate risks — trading Euro FX futures can be rewarding. However, you need the right Euro FX futures strategy. Hopefully, this guide, Euro FX futures Explained (EURUSD) has introduced you to the basics of the Euro FX contract.
List of trading strategies
We have written over 1000 articles on this blog since we started in 2012. Many articles contain specific trading rules that can be backtested for profitability and performance metrics.
The trading rules are compiled into a package where you can purchase all of them (recommended) or just a few of your choice. We have hundreds of trading ideas in the compilation.
The strategies are taken from our source of what are the different types of trading strategies. The strategies are an excellent resource to help you get some trading ideas.
The strategies also come with logic in plain English (plain English is for Python traders).
For a list of the strategies we have made, please click on the green banner:
These strategies must not be misunderstood for the premium strategies that we charge a fee for:
FAQ Euro FX Futures
Let’s end the article with a few frequently asked questions:
What is Euro FX Futures?
Euro FX Futures (EURUSD) are futures contracts based on the currency exchange rate between the euro and the US dollar. The contracts are traded on the Chicago Mercantile Exchange (CME), and their prices are quoted in US dollars per euro. The contract size is €125,000.
How do I trade Euro FX Futures (EURUSD)?
To trade Euro FX Futures (EURUSD), you must open an account with a futures broker and deposit the required margin. Then, you can place orders to buy or sell the contract on the CME Globex exchange. We are using Interactive Brokers and believe this is the best option for active retail traders.
What are the risks associated with trading Euro FX Futures (EURUSD)?
The risks associated with trading Euro FX Futures (EURUSD) include market risk, counterparty risk, liquidity risk, and credit risk. You should carefully consider all of these risks before trading this product. For example, liquidity might be an issue if you are trading outside regular trading hours.
What are the advantages of trading Euro FX Futures?
Trading Euro FX Futures offers several advantages, including the ability to take advantage of price movements in the euro/dollar exchange rate, access to leveraged trading, and the ability to hedge foreign currency exposure. However, we believe forex trading is tough, and you are better off trading stocks or the stock market:
What is the best time to buy EURUSD?
There is no best or worst in trading. The market depends on many factors, and only a quantified backtest can determine what works.
Is it good to trade EURUSD at night?
That depends. Sometimes it pays off to trade when liquidity is low, but only a backtest can tell if it’s a good idea.
What is EURUSD correlated with?
Correlation varies over time. Sometimes a currency pair is correlated, and sometimes not. However, among our currency pairs, the GBP/USD seems most correlated to the EURUSD
FAQ:
How do you start trading Euro FX Futures?
To trade Euro FX Futures, you need to open an account with a futures broker, deposit funds, and execute trades through the CME Globex electronic platform. Additionally, trading CFDs with an online broker is an option for those seeking flexibility without dealing with physical delivery.
What factors affect Euro FX prices?
Economic reports, political events, interest rates, inflation-focused reports, growth reports, and sentiment reports are common factors influencing Euro FX prices. Traders need to stay informed about these elements for effective decision-making.
What are the risks associated with trading Euro FX Futures?
Risks include market risk, counterparty risk, liquidity risk, and credit risk. Traders should carefully consider these risks, especially when trading outside regular hours where liquidity may be an issue.