Home > Forex > AUDNZD breaks out of 10-year trading range

AUDNZD breaks out of 10-year trading range

March 5th, 2010

… and it really breaks my main accounts right now. I’ve been grid trading this pair with RoboMiner since July 09 and gradually increasing the funds traded because it seemed a solid system. AUDNZD hadn’t been above 1.30 (or 1.2967) for 10-years. During January this year I spent 80-100 hours making my own gridtrading EA based on the same principle (but with quite a few improvements I think). They both break when price moves above ~1.30 thou, and this week it did, with a bang. I put my own EA, called Green, live just one month ago with a safety margin of 200 pips, IE it wouldn’t trade as soon as there wasn’t enough equity to cover a move to 1.2967 + 200 pips = 1.3167. Right now we’re at about 1.31. IE I only have about 70 pips left of margin before the margin calls start.

So, what to do? I can’t do much I think. I won’t fund the accounts with additional funds to cover even more margin. I am contemplating a hedge trade, but I feel that I should already have done this when the range broke, but I didn’t. So I might put in a smaller hedge now (for perhaps just 1/3 of the short positions) just to extend the upper limit I can handle. If we’re lucky NZ have been catching up to AU before my margin is out or at least AU have released some news that shows their growth have declined. The next high impact news out of NZ is scheduled for next Wednesday and Thursday, but analyst doesn’t really anticipate any improvements.

So what was my main fault? I didn’t diversify enough and went in with to much money into the same, somewhat flawed, strategy. Again. Also my timing was awful. Just one month ago I funded my CFX account and started trading the AUDNZD range. Had I waited just one month I wouldn’t have an additional $7000 on the line right now. What I should have done, and really was my original idea, was to trade multiple pairs with low correlation and I should have started out with smaller amounts. But the growth curve of trading the AUDNZD compared to the other pairs was too tempting.

So what does this mean for the future of AUDNZD range trading? I don’t know yet. If NZ catches up quick enough price should move down again and perhaps the cycle will continue for years to come, but with a higher historical high. Perhaps they don’t catch up and price goes up a bit more and starts ranging at a considerable higher range. It really shows that there is a need for more safety margin than 200 pips also, but when simulating with 500 pips the profits really isn’t to impressive anymore. One thing is for sure, next time I will be more careful.

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  1. March 7th, 2010 at 20:43 | #1

    Congratulations! I really like your blog and I follow it every weekend. I have noticed that you are from Sweden, so besides the forex we both have in common a job in a swedish company.
    I live in Brazil but the headquarter of my company is in Malmo and one of its factories are located in Karlshamn.
    I also have been developing my own EA for about 1 year and you can see my results at myfxbook under emc2forex.
    Regards

  2. March 8th, 2010 at 09:47 | #2

    Hi there. Well, it seems I should congratulate you. Extremely nice performance in those three accounts. Do tell me if you ever feel like sharing / selling that system.

    I’ve only been to Brazil once (two years ago), and then only to Rio de Janeiro, Foz do Igaucu and Paraty, but it was awesome. :)
    The Company I work for has a large assembly factory in Curitiba, but I still haven’t been involved in any project prompting my to go there, unfortunately.

    As for my range trader, perhaps it isn’t toasted yet. AUDNZD is (just) back under 1.30 now in a steep descent. But still this has shown some weakness in the system I think and I will start looking at alternatives.

    Good to hear from you / Johan

  3. emc2
    March 8th, 2010 at 15:50 | #3

    Hi Johan,

    Great to hear you have been to Brazil. If you come some other day do not hesitate to contact me. I’m going to Denmark now in April and maybe do Sweden…
    I will let you know if I decided to share the EA, since I’m still testing it. Do you have a myfxbook account, so I can follow you?
    The AUDNZD pair has changed its personality, from a range to a trend pair. I’m planing to develop my own grid trade EA as well based on currencies pair with lower spreads and with a function to close the trades based on global profit instead of TP.
    I really think grid trading is a great strategy and I have many ideias to develop and EA based on his concept that ignore indicators and use just price action.
    I wish you good trades

  4. March 9th, 2010 at 11:23 | #4

    Good that you wait til April to come there, it is way too cold right now :)

    The best account to look at is probably my CFX account, but only the AUDNZD trades is by my EA. The EURUSD there is by MegaDroid. http://www.myfxbook.com/members/someguy/cfx-live/15847

    I’m currently experimenting with a FIFO implementation, which also closes all trades when a defined profit is reached, that would work with MT5. I’m testing some dynamic grids based on trend, but this need more work. It is fun thou, so I’ll keep at it :)

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