12.10.2011 - Euro-Bund Future, Time To Short!

The European Bond Future moved as predicted in previous analysis'. It is now confirmed that the top has been reached and an investment can be considered.

We want to find an entry point and leverage for a short. One thing to note is that this future moves extremely slow. The whole downwards movement from 135 to 124 points - which would take half a year - would only result in 8,8% performance.

A leverage is needed to actually profit. Let's say SL (Stop-Loss) is at 139, which is above the top, and entry level is at 136, after a probable correction, and mid-target is 130  points. Then we would have a win/lose ratio of 2:1, meaning that our max. profit is double our max. loss. If price moves in our favor (down) we profit 4.6%, in the opposite direction we lose a maximum of 2.2%.

A win/lose ratio of 2:1 is fine, but the problem is that the relative performance of 4,6% over several months is extremely weak. Thus, we need a leverage. Consider losing a maximum of 50% percent of your  capital, resulting in 100% of profit, this results in a leverage of 50% / 2.2% = 22,72!

Conclusion: Wait for a good entry level at about 136 points and short with 20 - 25 leverage, depending on your maximum risk.