Tuesday, 31 July 2007

COTs Bearish Yen

I've just posted details of my new trading setup for the Japanese Yen based on the Commitments of Traders reports, which are issued weekly by the Commodity Futures Trading Commission. See the results at the "Trading Setups" link above.

The setup has been on a bearish signal - a profitable one - since May 2006. I wanted to look at the Yen because of the possibility that the Yen carry trade is unwinding and the currency's recent technical breakout on the charts.

I developed the setup after looking at both the combined futures-and-options data and the futures-only data for the Yen. I backtested a whole bunch of combinations of moving averages, standard deviations and trade delays to look at what happened when traders hit historic extremes of bullishness and bearishness. The idea was to see if this could lead to profitable trades that also stood up in terms of statistical robustness.

The Yen setup isn't one of the most statistically validated I've found (see the last two columns at that link for the details of my validation exercizes). But I think it'll be interesting to follow nonetheless. As time goes on, with more data, hopefully we can refine the setup in this market. So far, I believe this is the best one. (If you've found a better one, let me know!)

I'll include the Yen setup in my weekly updates.


Joe said...

Hi Alex,

I suppose we'll see some changes in your COTs analysis. I would not be surprised to see the treasury bonds and notes to come out bearish this time. Can't wait for your publication!

Thanks, Joe

Alex Roslin said...

Good call, Joe!