The GBP Pound was “Rigged” to get Strong! See the Proof. Did you know the path for the path for $GBPUSD was set for both May and June ahead of time? This is no game! Statistics show the probabilities and you can easily see it on the charts.
We are going to use the tools from Alert Trades (www.alerttrades.com) to access the statistics for the spot Currency $GBPUSD. Alert trades offers a free service for statistical information for any Currency, Future, and Global Stocks.
On June 1, the Top Picks are posted on the website. Here is a snapshot of them: Notice on the Bullish side, you had GBPUSD and GBPJPY. It had the GBP getting stronger. On the bearish side, it had the CHF getting strong which USDCHF, CADCHF, NZDCHF, and EURCHF. Therefore, statistics indicated that the GBP and CHF would get stronger this month.
Statistics show what has happened in the past. It does not mean it is 100% guarantee it will happen again. Therefore, you have to have the technical setup that supports the statistics.
Below is the June statistics for the $GBPUSD: It show indicated that it had a 87% probability of being bullish this month. Also, whatever this month, it is 14% of the move for the entire year. This indicated that on the swing trading time frames, price was going to trend.
The Average % move is 1.7% and the average max draw down is going to be 1.1%. This is a little over 1:1 reward/risk ratio.
Our Money management in our trading plan dedicates that we can’t take a trade unless we see an opportunity for a 3:1 reward/risk ratio. Therefore, we have to wait for price to get to a support before we buy. This way, we buy close to the draw down in order to increase the reward/risk from 1:1 to 3:1.
Below is Daily Ichimoku chart on June 1, 2016. The major resistance is at 1.4551 and the major support was 1.4304. From the current opening price to the major support, this would be a 1.22% move. This is around the 1.1% that is suppose to occur for the draw down. However, we just can’t sell due to statistics. We can only sell once we get to a major resistance. Therefore, in order for me to sell the $GBPUSD I have to wait for it to pull back to the resistance value of 1.4551. If the sell order executes then the target would be the support at 1.4304.
On June 10, we reached the the major support after we entered the trade. We exited the trade. However, we did not enter a buy order due to our trading plan i.e. Ichimoku Rules. Ichimoku Rules indicated that the support could be broken since it was not an iMTF™ support. We waited for price to close as based on the trading plan. Since we closed below the cloud, there was a high probability, we could retest the low around 1.4050. The lower time frames also indicated this too. We therefore, had to wait for price to reach the support at 1.4050 for wait for a bullish setup on a lower time frame.
On June 16, 2016, we reached the support of 1.4050 and entered the trade. We had a tight stop and we also were monitoring the close of the daily bar based on your trading plan. If we closed below 1.4050 then we had to exit the trade. Price closed at 1.4211 so we stayed in the trade.
Based on the statistics, the reward/risk is 1:1. The average draw down was 1.1% but this month so far, we had a 3.00% draw down down ward. Therefore, in order for the statistics to continue to remain valid, price had to move 6.11 from the major support of 1.4050. 3% to the opening price of the month and then another 3% higher which would make the reward/risk 1:1 again. This is asking a lot since this would mean that the consolidation pattern resistance would be broken.
Our trading plan had us managing this trade off a lower time frame up to the resistance of 1.4551. After that, we will take 50% of our positions off. At the pivot high resistance of 1.4700, we will take another 25% off and then we will allow the last 25% to get to 1.4913 with a stop that is tightened.
Here is the current chart as of now: Amazingly, price got retrace over 6% from the support to validate the statistics!
If you think this was a fluke, look at last months statistics for $GBPUSD. Here is the information. It showed a 90% probability of going down!
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Below is the daily chart in May. Based on the statistics, the support would be 1.4307 and the resistance would be 1.4770. On the Ichimoku charts, the major support was 1.4391.
If you look backward to Feb 1, 2016, the beginning of May was retesting the top of the consolidation pattern. Therefore, we had two options. One is to short it at the top of the consolidation with a tight stop or to look for a bearish setup on a lower time frame.
Statistics showed the draw down was going to be a 0.6%. So you could take the option of shorting it right away and try to get to the Ichimoku support. With this draw down, you would get less than 3:1 reward/Risk. Therefore, we went to a lower time frame to setup for a trade.
In conclusion, the $GBPUSD is following statistics! It didn’t even know about the veto of UK leaving the European Union. Interesting isn’t it! We are out of the trade before all the veto start coming and could reverse it!
Check out the CHF pairs mentioned at the beginning of this article and see what happened!
If you would like to learn how to trade like an institutional trader or learn more about our multi-timeframe email alerts, go to www.ichimokutrade.com or email us at info@eiicapital.com
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