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Gbp/jpy Trading

  • #21
  • Apr 7, 2007 10:01am Apr 7, 2007 10:01am
Quoting Spudfyre
This is great stuff Forex1man. Forget the naysayers. Please keep writing I am most interested in what you are writing here.

Not sure if you have tried this yet, but I'll definitely fiddle with it....is taking the 2 pairs and working out the stochastic movement of the 2 pairs combined as one to see what the relationship is to the GBPJPY stochastic. This would provide you with a better visual of how much lead, if any you have on the GBPJPY. Might make for an interesting forecasting tool.

It would make sense if the GBPJPY is following the lead of the 2 pairs, that the stochastic movement of the combination would lead as well....without calculating it out completely, there should be equal moves but an offset in the time.

As in A*B=C where C lags A*B by t seconds
therefore
Stochastics (A*B) = Stochastic (C) where stochastic (A*B) leads stochastic (C) by t seconds
So plotting Stochastic (A*B) on one graph and Stochastic (C) on another graph should only vary by the offset in t seconds.

Interesting to see if t seconds is a constant or what variance there is to that lead in time and if it is of any use for trading.
Spudfrye. thanks for your thoughts and please investigate that possibility. Also I was going to lead people to your thread ,because I am impressed with your work with stochastic and I am personally following your setup's also. For those who haven't been to his thread you need to check it out beause it will only help you find some longer term setups to trade. Actually since most of you that are following this are starting to see some of its potential value of this knowledge it does inspire me to share more information. First of all I want to admit, I am sure I am not the only person that has this knowledge presented so far and second, the knowledge itself is not even very special. I believe it is what you can do with it that is the key here. The math portion is very concise and actually easy to understand once you have the proper thoughts on how to use. I only wish that I could have read this thread 6 months ago and been at the place I am at back then. I do not project you are going to get any earth shaking knowledge here that is going to make you a guru trader from reading this thread. Instead I think you will understand where the movement of gbp/jpy is coming from and will be able to find some
places in your trading of it, that will now hopeful be helpful. Example: Hopefully you are not going to go short gbp/jpy if you notice the usd/jpy and gbp/usd are moving up together, or the opposite on down. I do have some more to share and a few unique ways of taking advantage of the opportunities and finding the opportunities to trade this concept with when it happens. I will be adding small bits all weekend time allowing...
  • #22
  • Apr 7, 2007 10:34am Apr 7, 2007 10:34am
Forex,

I'm not a naysayer, per se...

I just see a contradiction in your logic, I suppose.

If you say that you've understood that arbitrage opportunities aren't feasible because 99% (or more) of the time the USD/JPY * GBP/USD = GBP/JPY, then I don't see how the GBP/JPY becomes a "follower".

Why couldn't it be GBP/JPY divided by GBP/USD = USD/JPY? In other words, Why couldn't the USD/JPY be affected by the movements in the GBP/JPY and GBP/USD?

I'm just trying to say that if at any time you can calculate any of the pairs, from the others, then it means that you can't necessarily predict the movement of any of the other pairs. That means that none of the pairs are "followers". Now, it is ABSOLUTELY true, that you can determine what the immediate reaction of another pair by using the other 2 components pairs...but it isn't necessarily "predictive".

I could just have easily said that both the GBP/JPY is going down and the GBP/USD is going up, and therefore, the USD/JPY is going down, and at any spot moment, I could tell you what the USD/JPY rate is from open to close would have been based on the rates of the GBP/JPY and GBP/USD. So, what exactly does that mean? It means the JPY was strong, and the USD was weak, which would simply tell me that the USD/JPY would be down.

If GBP/JPY is a "follower", then it means, by definition, that you could predict the FUTURE movements of the pair...which I'm trying to challenge you on. It would be wonderful if what you're saying is true.

I just want the folks that read this to understand that you could take any 3 pairs in any order, find their mathematical make-ups and start telling us what would happen if the other 2 components moved in whatever direction because of the mathematical correlations to each other. However, the REAL movement of the pair is caused by the underlying fundamental movements of the currencies...not the individual pairs...that's what I'm saying...that's not necessarily a disagreement with what you're saying...it's just not in agreement either.

Feel free to disprove me, though...I'd love to be wrong in this case.
  • #23
  • Edited 6:15pm Apr 7, 2007 4:00pm | Edited 6:15pm
I am not going to try and answer because I am not sure that you are incorrect in anything you said. I do not believe that I can predict the the outcome of gbp/jpy in the future dependent upon only 1 pair such as gbp/usd or usd/jpy. If I have said that or that is the way it is being interperted I am wrong. What I was hoping to get the point across is this: that if usd/jpy and gbp/usd are moving with strength in the same direction either up or down then gbp/jpy is also moving in that same direction at a faster pace then the sum of the other two. Now if that is predicting the direction that gbp/jpy is going in then yes, I am willing to go on the limb here and say it will happen. Never will you see usd/jpy and gbp/usd ticing up or down together and gbp/jpy doing the opposite per tic other then the broker changing the spread on you. Now with that said, I am not sure whether in your above statements that you will disagree or not with that. So like you did say maybe you think I was making a stronger prediction, that I could predict the outcome of the gbp/jpy at most times which is truly not possible. Either way I think your explaination was very good above and I don't think I can refute anything you added. On the otherhand I am not sure if any of the math here is actually important and plays a role in the outcome. The math was needed to demonstrate why the gbp/jpy will move more then 1 tic in the same direction of the usd/jpy is moving per tic if the gbp/usd is flat. And also why if the gbp/usd tics down 1 tic and the usd/jpy tics up 1 tic the gbp/jpy will also tic upward not downward. Now on the follower point. I might be using the wrong word here. Here is my point if you will watch price action of the pairs on lets say a tic chart all 3 side by side. You do not see the gbp/jpy very much say tic up then the usd/jpy then tics up or usd/gbp tics up. Most of the time the usd/jpy tics first or gbp/usd followed by a tic in the gbp/jpy. I do not have in rational why it is that way, it just happens almost all the time that the gbp/jpy does not make the first move in either direction till one of the pairs moves first. Personally I find this to be very intersesting and perhaps someone can explain this to us all. I would personally think that if someone was to place a large gbp/jpy order in volume that it would jump a lot of tics first, maybe it is all happening so quick it doesn't show. .
  • #24
  • Edited 11:10pm Apr 7, 2007 11:09pm | Edited 11:10pm
Hi Forex1man,
Your insight of bgp/jpy is fantastic . Please continue your explanation .
Don't pay attention to anybody else . They didn't have the understanding of bgp/jpy like yours .
Thanks for your thread.
  • #25
  • Apr 8, 2007 10:00am Apr 8, 2007 10:00am
Hello,

very interesting thread .
Did you consider who are the main players in the GY pair ? Those are usually the big hedge-funds playing this pair because of the positive interest rates they are getting out of the carry trades..and they trade in really interesting sizes most of the times. Thus maybe upgrading the GY pair to a little bit more than just being the result of the moves of the 2 major pairs; over the past months if often seemed that the GY pair was leading the GU moves.
For carry trade purposes a direct engagement in GY is much more interesting than constructing the same effect though 2 pairs, as interest recieved and paid for US-$ is usually different.

Thanks again and I am looking forward to more !
PP
  • #26
  • Apr 8, 2007 11:09am Apr 8, 2007 11:09am
Forex,

The insights in your posts are important, so please, don't feel threatened by anything I'm saying...I'm just challenging you, so that hopefully together we have a mutual break-thru (in either direction, affirming or canceling). I think you've noticed a few things that, are indeed very true.

First, some clarifications, my previous post does not try to imply that you know how to predict the movements of the GBP/JPY based on only 1 other currency pair. It does imply that your choice of wording by calling the GBP/JPY a "follower" may lead people to believe that you can predict the movement of the GBP/JPY based on 2 currency pairs.

Secondly, the math I included to calculate the other 2 rates based on the GBP/JPY above is theoretically correct. To prove this, all you have to do is come up with an accurate calculation of the GBP/JPY using the USD/JPY and the GBP/USD and then do the reverse calculations, and you'll see that I'm correct.

So, if the USD/JPY = 118.50 and the GBP/USD = 1.9750 then your formula would calculate the GBP/JPY = 234.04 (rounded up).

My calculations could simply tell you the rate of the USD/JPY. If I were given that the GBP/JPY = 234.04 and the GBP/USD = 1.9750, then the USD/JPY = GBP/JPY divided by the GBP/USD = 234.04 / 1.9750 = 118.50.

My calculations could also tell you the rate of the GBP/USD. If I were given that the GBP/JPY = 234.04 and the USD/JPY = 118.50, then the GBP/USD = GBP/JPY divided by the USD/JPY = 234.04 / 118.50 = 1.9750.

So, there you have it...

To your point, though, the GBP/JPY DOES move faster than the USD/JPY and the GBP/USD in PIPS. In percentage points, I would say that it probably doesn't.

Now, your second point is what I find extremely interesting, and something that we'd have to really check using tick charts. What you said was that the GBP/USD or USD/JPY would move up first while the other would stay the neutral, and THEN the GBP/JPY would move up. If that is the case (which I cannot disprove, so I'm being completely open-minded about that), then that would truly be "predictive" and truly make the GBP/JPY a "follower"...now, of course, whether or not we can take advantage of that is another thing. If there were no spread, it would be easy to see that we could make BILLIONS because we'd simply buy/sell at equilibrium for a single pip (or slightly more) at a time as we predicted the pip movements of the GBP/JPY. However, the spread is what makes it difficult-to-impossible to use that information.

With that said, what you have said in previous posts about not shorting the GBP/JPY when both the USD/JPY and GBP/USD are in uptrends is probably true. SO...maybe we can apply 2 MA crosses on both the GBP/USD and the USD/JPY and determine that when the crosses occur on those 2 pairs, does the same MA cross occur on the GBP/JPY and which ones happen first...or something along that line...*NOTE* I just thought of that off the top of my head, and have not tested or really even put any effort into researching it, so I'm not necessarily suggesting it, I just thought that perhaps if we can use some sort of signals on any 2 pairs to "predict" the same signal on a 3rd, THAT would be useful information.

Anyway, like I said, I'm merely participating in this thread to challenge you to come up with a truly great solution. I want something positive to come out of this thread, just as much as you do, so I'm here to help try and poke holes in your theories to keep it real for all of us. Remember that the sharpest blades of steel are forged in fires and pounded with hammers...

Quoting Forex1man
I am not going to try and answer because I am not sure that you are incorrect in anything you said. I do not believe that I can predict the the outcome of gbp/jpy in the future dependent upon only 1 pair such as gbp/usd or usd/jpy. If I have said that or that is the way it is being interperted I am wrong. What I was hoping to get the point across is this: that if usd/jpy and gbp/usd are moving with strength in the same direction either up or down then gbp/jpy is also moving in that same direction at a faster pace then the sum of the other two. Now if that is predicting the direction that gbp/jpy is going in then yes, I am willing to go on the limb here and say it will happen. Never will you see usd/jpy and gbp/usd ticing up or down together and gbp/jpy doing the opposite per tic other then the broker changing the spread on you. Now with that said, I am not sure whether in your above statements that you will disagree or not with that. So like you did say maybe you think I was making a stronger prediction, that I could predict the outcome of the gbp/jpy at most times which is truly not possible. Either way I think your explaination was very good above and I don't think I can refute anything you added. On the otherhand I am not sure if any of the math here is actually important and plays a role in the outcome. The math was needed to demonstrate why the gbp/jpy will move more then 1 tic in the same direction of the usd/jpy is moving per tic if the gbp/usd is flat. And also why if the gbp/usd tics down 1 tic and the usd/jpy tics up 1 tic the gbp/jpy will also tic upward not downward. Now on the follower point. I might be using the wrong word here. Here is my point if you will watch price action of the pairs on lets say a tic chart all 3 side by side. You do not see the gbp/jpy very much say tic up then the usd/jpy then tics up or usd/gbp tics up. Most of the time the usd/jpy tics first or gbp/usd followed by a tic in the gbp/jpy. I do not have in rational why it is that way, it just happens almost all the time that the gbp/jpy does not make the first move in either direction till one of the pairs moves first. Personally I find this to be very intersesting and perhaps someone can explain this to us all. I would personally think that if someone was to place a large gbp/jpy order in volume that it would jump a lot of tics first, maybe it is all happening so quick it doesn't show. .
  • #27
  • Apr 8, 2007 11:21am Apr 8, 2007 11:21am
The purpose of this thread was to give comments regarding how the gbp/jpy pair reacts with moves in contrast to the usd/jpy and the gbp/jpy pairs. I am very sure there is more knowledgeable people here that can explain the rational behind the moves then me. I thought I would try to explain in very simple terms why if 1 of the pairs moves why the gbp/jpy does what it does. If my math is incorrect or the reason is not exactly right for the move, I admit and stand corrected to whomever can explain and has more knowledge then I do on that subject. What I really wanted to share is: because of the correct math or reason there are things happening that you can see and watch and will give you more insight to trade this pair, rather then to just place a buy or sell order like most of us have been doing. I very much agree with one poster, who said it was the underline fundamentals that is causing the movement. I believe that is what is causing all the currencies to do want they are doing going up or down. I also agree with the poster who said you can take any three pairs and come up with the price of the lone pair by using math. I am not trying to predict the price of the gbp/jpy at any moment but rather to take advantage of movement in direction of the gbp/jpy because of what the other two pair are currently doing. I can see that when you start a thread like this it is very easy to lose sight of the meaning of the thread and start trying to disapprove all that has been said that is not perfect in its explanation. So let's end all the correct and incorrect mistakes that I have made and get on with how I take advantage of certain moments in time when I see the usd/jpy and the gbp/usd move in a certain way. Or we can shut the thread down and hopefully we all have gained some new knowledge about the pairs. I know I have from some of the excellent posts that have been made by some very knowledgeable individuals that have shared their insight. I do not feel it has been a waste of my time, personally I am doing this for a living 18-20 hrs per day and anything that might make it easier to gain a pip or 2 each day is appreciated on my part.
  • #28
  • Apr 8, 2007 8:33pm Apr 8, 2007 8:33pm
Hi Forex1man,
Please disregard negative attitude or arguments towards your thread. Your
valuable information is always appreciated by any newbies like me.
Please continue your writting .
Thanks
  • #29
  • Apr 8, 2007 8:54pm Apr 8, 2007 8:54pm
Hi Forex1man,
Your thread provides wonderful information regarding gbp/jpy.
Please continue your writting and please continue your explanation .
Anybody, please step aside and let Forex1man express his finding .
This is Forex1man 's thread . He has good information to share . So let him have the room and time to express his finding.
Thanks
  • #30
  • Apr 8, 2007 9:23pm Apr 8, 2007 9:23pm
MRMikal and Forex,
Keep up the discussions. In my view (wether you know it or not) you are involved in healthy positive discussions. Each of your post brings out new ideas and new thoughts to ponder. So keep it up......both of you.

jj/.
  • #31
  • Apr 10, 2007 4:50pm Apr 10, 2007 4:50pm
Hi Forex1man,
As a very successful trader with 6 figure account like you ( you mentioned in onada forum ) you must did something right . Please share your trading experience of gbp/jpy with us. Please continue your thread .
Thanks
  • #32
  • Apr 10, 2007 4:54pm Apr 10, 2007 4:54pm
I have a 6 figure account, too...7 if you count the decimal point.
Illegitimi Non Carborundum
  • #33
  • Apr 11, 2007 5:33pm Apr 11, 2007 5:33pm
I currently need to be absent from the thread probably for rest of week because of personal matters keeping me away from the computer and trrading. I believe this thread has a lot of potential for being of value to us all from the posts coming from all interested people who also have a lot to contribute. I have much more personally and hopefully that will lead us to us other ideas for all us to share and learn some interesting concepts that will in turn make some pips. I promise not to let this thread die and will be back as as soon as poosible......
  • #34
  • May 31, 2007 6:17pm May 31, 2007 6:17pm
Quoting Forex1man
I currently need to be absent from the thread probably for rest of week because of personal matters keeping me away from the computer and trrading. I believe this thread has a lot of potential for being of value to us all from the posts coming from all interested people who also have a lot to contribute. I have much more personally and hopefully that will lead us to us other ideas for all us to share and learn some interesting concepts that will in turn make some pips. I promise not to let this thread die and will be back as as soon as poosible......
Dear Forex1man,

thank you for starting your thread, which is definitely a value added to ff here, as it again makes us all aware of the underlaying math the pairs are related to.

To better find A-Type of settings, like you said, I would be interested to know more about your approach of spotting them.

Simulteaneous break of trendlines/flags/triangles of GU and UJ in the same direction might be a first try.

I myself was during the past years very much up to identifiying tops and bottoms by using moving averages with a time shift (or a double smoothed stochastic oscillator as alternative concept), as they show the underlaying swings very well. The lack of those systems - doing extremly well in ranging markets - is the shift from ranging to strongly trending type of situations.

There your thoughts might provide a clue in order to better judge the likelihood of crashing down the reverse signal or confirming it. Yust a slight hope at the moment

Although the cycles of UJ and GU seem to alternate generally and maybe differ in length, at certain periods there might an "alignment" take place and this increase of their combined power will obviously result into huge moves at the GJ side. Just a thought, will try to research a bit about this.

Waiting to hear more from you soon.
Regards
T.

PS Another remark to mrmikal:

Quoting mrmikal
Forex,

The insights in your posts are important, ...

To your point, though, the GBP/JPY DOES move faster than the USD/JPY and the GBP/USD in PIPS. In percentage points, I would say that it probably doesn't.

...
You are possibly right about this mrmikal (I did not check this either), but take into consideration that a PIP VALUE in UJ and GJ is USD 8,22 and in GU USD 10. So a move 1 pip up in UJ and 1 pip up in GU (together USD 18.22 in VALUE) result in 3 pips up in GJ, reflecting a VALUE of USD 24.66 !
always expect the unexpected!
  • #35
  • Last Post: Jun 1, 2007 10:11am Jun 1, 2007 10:11am
Hello, to all interested,

like I have said yesterday, I did give it a little try. I combined in an Excel-Spreadsheet (see attachment) the Double Stochastic Indicator Output (DST)of GU and UJ. Settings had been : %K Periods: 5, %K Slowing Periods: 4, %K Slowing Method: EMA. Based on the hourly chart of GU and UJ.

Then I tried to combine these output levels of DST.

Interestingly seemed, that the product of DST-UJ and DST-GU (in the table marked DST*) was somehow at certain times running very close with the DST UJ and at other times closely with DST GU. You could spot these periods of "adhesion" by just looking at the lines.

This led me to calculate the distance between them (DST*-DST UJ and DST*-DST GU).

Now the hypothesis:

1) Whenever the distance between them gets very small (so the graphical curve of this difference comes close to zero) it defines wether GU or UJ is ruling the scene.

2) Taking this as a filter for the DST UJ and DST GU as reversal-signals I would suggest only entering when the DST you are following is ruling the scene (difference of its product is close to zero).

I did only check this for 34 hourly bars backward and it resulted in four signals, all very well sitting. The ordinary false signals the DST would be giving if only following this single indicator could have been avoided.

(Hope I did not make any mistakes in counting the bars )
A BUY of GJ at the 05-31-07;06:00 bar (GU rules and its DST gives the signal)
A BUY of GJ at the 05-31-07;19:00 bar (UJ rules and its DST gives the signal)
A SELL of GJ at the 06-01-07;02:00 bar (GU rules again)
A BUY of GJ at the 06-01-07;07:00 bar (UJ rules)

Just check it out. Hopefully someone is able to backtest it over a much longer time period. Maybe it turns out that it does not work in the long term, maybe there is something in it.

All the best,
Tiku
Attached File(s)
File Type: zip DST UJ-GU.zip   6 KB | 402 downloads
always expect the unexpected!
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