FX:AUDNZD   Australian Dollar / New Zealand Dollar

1. Based on the last 16yrs of daily close data (since 01/01/2000 to date) AUDNZD has a cumulative probability of a =>7th day lower at 0.5%, hence there is a implied 99.5% chance of reversal on the daily.

2. Technically there is also some nice structure about the 1.045 level.

Trading Strategy:

1. Sell AUDNZD at market in 1xlot, and add 2x on each daily close lower from here. Start in VERY small lots to reduce risk and ensure you can add on adverse moves lower (it could be several days). TP is the next/ First daily close higher.

Any questions please ask - also see performance attached of recent trades using the same stats
Comment: AUDNZD Fundamentally -

I also think AUDNZD is in a justified structural downtrend especially so as the fed didnt hike which should see more kiwi yield buying in the medium-term over aussie given as we all know that the kiwi rate differential is 50bps higher than aussie. Realistically 1.00 is the fairer value, as aussie and kiwi macro econ is very similar but kiwi rates are higher, not to mention both RBNZ and RBA are at relative "sticking" points with their macro policy, both have realised the marginal returns to each cut is diminishing rapidly (with house prices an issue also) thus the 25-50bps differential is likely to coexist for sometime - add the weak fed situation in there its hard to justify AUDNZD above 1.00 in the medium term (higher rates, similar macro, similar RBNZ vs RBA). Apart from the massive "Overselling" which has caused this recovery/ profit taking rally imo, we should resume the down trend soon.
Comment: Adding 2x on the close higher - remember i posted to be VERY SMALL, if you didnt do this then it defeats the point and you probably wont be able to add. we are trading probabilities not R:R gambling.
Comment: - same principle that paid off.. theyre all just a matter of time.


How are you working out the 99.5% probability of a reversal?

Where do you put your stop loss?

I'm short at 1.04962 with SL @ 1.0550.
99.5% is the cumulative probability of = to or > 6 days and higher.. e.g. out of the last 16yrs of daily close data, we have seen AUDNZD trade 6, 7, 8 etc days higher only 1/200 times. You can calculate it in excel.

This trade has now finished on the move lower, just missed break even but you cant win them all.

No SL is used.
Is this strategy only used on the daily TF? Thanks
QuantumLogicTrading GabrielHernandez
Hi yes the data used is for daily only.. could be used for any TF but would need to be calculated again. personally i think the daily is the most significant TF that ALL traders will conciously/ subconciously analyse - especially with trends etc.
GabrielHernandez QuantumLogicTrading
I sent you a private message about your private training. Thanks
not too cool to add on a losing trade.
QuantumLogicTrading BernhardAnalytics
did you read the actual explanation? you enter SMALL and add on a closer lower - this was a winner on the same day, you cant win every trade. winners think about winners, losers think about winners - hence your comment.
Great explanation
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