QuantumLogicTrading
Short

SELL GBPAUD: STRAT TRADE - 5 Days up P=98.78% 6TH DAY LOWER

FX:GBPAUD   British Pound/Australian Dollar
3 months ago
GBPAUD:

1. SterlingKiwi has been aggressively bid higher for the last 5-days on the back of sterling data outperforming last week, broad aussie weakness and a general recovery from lows.

2. Statistically, after analysing the last 16.5yrs of data it shows the probability of a 6th day or more of buying is 1.22% which means there is an implied 98.78% chance that we move higher today - I like these odds so will add a short here.

- If we were to see another day of buying, a 6th day, then the probability of a 7th day is even better on the sell-side odds of 99.45% so i will add to shorts if this is the case - the max number of buying days in GBPAUD             has been 10 once and 9 3 times.

3. Plus aussie 30 bill rates firmed up on monday implying only a 5% chance of a september cut down from 8% of the past week, and sterling OIS             rates came off from fridays rally after the market decided to fade last weeks data.

- Also we have found some technical price resistance at the 1.72 handle so being short here makes sense.

Trading strategy - GBPAUD             Sell @1.721:

1. Short GBPAUD             pretty much at market TP should be 100pips lower at the 1.711 level.

2. Also check my previous post of short gbpnzd             into rallies at 1.81 and GBPUSD             into 1.315-32
3 months ago
Comment: UPDATE:

1. Just wanted to add a little "trade tracker" since its a strat im trying.

2. So far this strat is 2/2 with DXY long and eur$ short on friday both TP after 50consecutive days - like this trade.
3 months ago
Comment: Update:

1. Also to explain this strat some more - the profit taking is capped at the daily close... if profit isnt hit by day bar close, you TP on the close DO NOT leave the trade open into the next day.

- if the trade is in loss - you close the trade on the close of the daily bar and ADD another short as the odds of a 7th day higher is 99.3% (even higher than a 6th day obviously).
3 months ago
Comment: Update:

1. 6th day higher confirmed - here at 1.733 i will add, P=0.5% of a 7th day higher implying 99.5% chance of reversing lower today based on the last 16.5yrs of data or 4500days.
3 months ago
Comment: Update:

1. Todays lows to 0.720 confirmed the trade as a net winner of 100pips+.
marcus123
3 months ago
is this still a short?
Reply
QuantumLogicTrading marcus123
3 months ago
Check the update at the bottom - small and add - statistically GBPAUD should reverse soon after 6 days higher the P 7th day higher is = 0.5% implying probability of reversal is 99.5%.. number of times in 16.5yrs that gbpaud has been 7 days higher is 13, so about once a year and the number of times greater than or = to 7 is 24.. the max is 10 days and that was once, 9 days 3 times, 8 days 7 - i personally got short yesterday small and will add more here 100pips higher.. better average. the tail risk is obviously going to 10 but that would be a 6sigma move with even 8 days a 4.5 sigma move.

Also fundamentally, given AUD employment report last week and strong yield vs UK economy a bit jittery at the moment i actually likely GBPAUD lower anyway - 1.70 i think will be the equilibrium... i just think we're in a bit of a macro "retrace" after moving 900pips lower post BOE and the RBA rate cut going somewhat unpriced at the time.
Reply
marcus123 QuantumLogicTrading
3 months ago
some really interesting logic and stats. where do you get the numbers regarding the days in a particular direction and how many times thats occured in 16.5 yrs and the probability of reversal? looks like a really interesting strategy!
Reply
QuantumLogicTrading marcus123
3 months ago
well you can get the price/ close on close price data from here for as many yrs as u want- http://uk.investing.com/currencies/gbp-aud-historical-data.
then you can work it out in excel - PM me and ill send you a picture of the calculations but basically you count the number of times GBPAUD has closed lower 1,2,3,4,5 etc days and higher 1,2,3,4,5 etc then its easy to turn into a probability - and its pretty obvious the number of consecutive days higher statistically becomes more and more unlikely e.g. we dont see 5 or 6 day runs that often, so you can trade it.. gbpaud is looking interesting though given its now trading in the 0.5% or 3 sigma odds, we're 3 devations above the average now - median being 1 day higher or lower
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