How to trade seasonal patterns in Forex, today: the EUR/NZD

  • master
  • 04.04.2019
  • Comments Off on How to trade seasonal patterns in Forex, today: the EUR/NZD
<p>
The first ten days of April will probably be of special interest for EUR/NZD traders. While the currency pair went for a test and short stint below the 2018 yearly lows, it saw a significant pullback last Wednesday. This came in response to the RBNZ stating that the next shift in interests will most likely be downward, and the likelihood of yet another downwards drop in the coming days is very high from a seasonal perspective.
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</p><h2>Seasonal Pattern in EUR/NZD</h2><p>
In fact, there is a historically significant probability of a falling EUR/NZD between April 1-10. In 15 out of the past 20 years, the EUR/NZD dropped an average of 235 pips, while losing only 106 pips on average during the remaining five years, with a maximum loss of 240 pips.
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</p><h2>How to Trade The EUR/NZD Seasonal Pattern</h2><p>
But now the interesting question: how can we trade this?
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We want to use the following plan:
</p><ol>
<li><em>After identifying the profitable seasonal window, enter the market on the opening price of the starting date on April 2 (23:00 CET), at 1.6516. </em></li>
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<li><em>Identify the maximum loss within the seasonal period. Then, have a look at the Daily chart and the indicator ATR(14). <br>
</em><br>
If the maximum loss is <strong>above </strong>the ATR(14) reading, round it up to the next round number and use it as <strong>worst-case-stop</strong>. <br>
If the maximum loss is <strong>below </strong>the ATR(14) reading, use the ATR(14) as your <strong>stop-width</strong> (rounded up to the next round number). <br>
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Since the ATR(14) in the EUR/NZD on a daily time frame is currently trading around 110 pips, we want to use the maximum loss of the window of 240 pips as our worst-case stop which we place at 1.6756. </li>
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<li><em>Look at the average gain of the seasonal pattern. Place the take profit away this average gain from your entry point. <br>
</em><br>
The average gain of the seasonal pattern is 235 pips within this period. So, after entering the trade on the opening price of the 02nd of April at 1.6516, we subtract those 235 pips from it to get our Take Profit level at 1.6281. </li>
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<li><em>If the trade is not stopped out as such, it does not reach its take profit within the seasonal period – end the trade market on the closing price of the identified period (in the chart below you can see a yellow <a href=”https://admiralmarkets.com/trading-platforms/metatrader-se”>smart line</a> on the right for exactly that purpose). </em></li>
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<a href=”https://admiralmarkets.com/analytics/traders-blog/seasonal-pattern-eurnzd-april”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/d9cc406aef80352c9039831ab6e7f7df.png”></a>
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<em>Source: Admiral Markets <a href=”https://admiralmarkets.com/trading-platforms/metatrader-5″>MT5 </a>with </em><a href=”https://admiralmarkets.com/trading-platforms/metatrader-se”><em>MT5-SE</em></a><em> Add-on EUR/NZD Daily chart (between December 16, 2017 to March 29, 2019). Accessed: March 29, 2019, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.</em>
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In 2014, the value of the EUR/NZD fell by 7.3%, in 2015, it increased by 2.5%, in 2016, it fell by 5%, in 2017, it increased by 11.7%, 2018, it fell by 4.4%, meaning that after five years, it was up by 2.0%.
</p><p>
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