Identifying GBP Futures’ Effective entry price levels

In this study we will examine the British pound, which, after a large drop in late 2008 against the major currencies, has subsequently appreciated establishing itself as one of the strongest currencies in the market.

The objective of this analysis is to find elementary and effective entry price levels.

We will take as a reference point the minimum prices hit year by year since 2010.

We will then use these lows as supports. The supports thus identified will act as entry points for buying the future. Specifically, if the price of a future hits the previous year’s low we will use that price level to enter the market and hold the stock until the end of the year.

The results of the above mentioned trades are summarized in the table below.

Avarage tick movements	Win Ratio	Total Trades	Currency Pair
0,0344	0,71	7	GBP/USD
0,0334	0,57	7	GBP/AUD
0,0478	0,75	4	GBP/CAD
0,0358	0,83	6	GBP/CHF
-0,0035	0,60	5	GBP/NZD

Table 1 – Short backtest.

Analyzing Table 1, we immediately notice how the entry so designed represents an excellent choice: the overall average tick movements is 0.0296 and the overall Win Ratio is 69%.

If we use the same entry methodology on EUR/GBP, we obtain:

Avarage tick movements	Win Ratio	Total Trades	Currency Pair
-0,0162	0,20	5	EUR/GBP

After hitting the lows of the previous year, only in one case does the Euro rise again against the pound, while in the other 4 cases GBP continues its climb, thus reflecting the currency’s strength.

This investment strategy identifies the yearly lows as supports that will then be used as entry price levels. The end of the year, on the other hand, is an indicative date for closing trades only.