I think GBPNZD is a good pair to trade given the valuation differntials of the two currencies. NZD wants to fall and GBP is is undervalued. The pair is the MOST undervalued pair relative to the major pairs and the GBP trade-weighted value.
It is worth about 2.50ish or so, fundamentally. It would make a good "buy-and-hold" trade for me, which is why I took the trade with a 100 pip stop.
Risk:
#1: Brexit Volatility. I did mention that the upcoming House of Lords and House of Commons "agreement in March 2017 for hammering the market is still causing uncertainty still. It makes GBP harder to trade. However, if we can good sell of in the NZD (FINALLY), then we can rest in this "hard-to-long-term-trade" market. I have been scalping. Hey, I even lost a long holding on a weekly, but that is the risk as a trader. Next Trade!
BUT WAIT?! I thought Brexit happened already. See my notes on GBPUSD:https://www.tradingview.com/chart/GBPUSD/wHLZKpJw-GBPUSD-Brexit-Uncertainty-Overrides-Fundamental-Valuations/
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Moved stop to break even.
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iammatthewkakande
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How did you determine the fundamental value? Using fibs?
Rocketman
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@iammatthewkakande, No, using economics, the GBP trade-weighted value combined with liner regression, the Big Mac index, CPI and my own formulas. The problem is patience in holding it. It could take a very long time to get there.
Rocketman
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@iammatthewkakande, fibs are are just numbers that measure how far the price has moved from a peak to and trough and vice-versa. They are good for sentiment and measuring how far the price has moved instead of calculating how far it moved using a calculator.
Try using fibs when driving your car or eating a burger. lol! The gurus teaches it as a magic numbers are just selling us snake oil. They only work as confirmation tools when it is logical that an exporter or large player Central Banker will want to buy or sell at that level.
When I studied math and found out about geometric sequences for the first time, I tried to apply it every where and come up with geometric formulas and algorithms for everything. It is from that experiences that I realized that not every mathematical sequence is a geometric sequence. Some sequences are purely arithmetic and you cannot obtain a geometric formula out of it.
So, geometric ratios and sequences are not in every aspect of math and certainly not in a trading decision.