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Trading seasonal patterns in Bonds, today: German Bund Future (FGBL)

July 10, 2019 11:00

Today, we want to look at one of the most active traded markets in the world: the German Bund Future (FGBL). The German Bund is especially interesting right now, after the latest developments around the ECB and in combination with a highly profitable seasonal pattern which occurred over the last 21 years.

On June 18, ECB president Draghi made further monetary stimulus from the ECB a topic at a speech in Sintra/Portugal which resulted in a sharp shift in the markets implied the probability of an ECB rate cut by September from initially 40% on Monday, to 87%.

That said, there seems an obvious willingness from the ECB to push European yields even lower and German yields into even deeper, negative territory.

We want to try to profit from it with a bullish seasonal pattern which developed over the last 21 years during the time span between July 15 through August 12.

Seasonal Pattern in FGBL

The key parameter of this seasonal bullish pattern look as follows: between July 15 and August 12, FGBL saw an average gain of 183 ticks for 16 of the past 21 years.

In the remaining five years, it dropped on average only 83 ticks, while the maximum loss was 176 ticks and the maximum drawdown 315 ticks.

Trade the Seasonal Pattern: #Bund_U9

And now the key question: how could we trade this?

Here's the plan:

  1. After identifying the profitable seasonal window, buy #Bund_U9 on the closing price of the starting date on July 15 (21:59 CET).
  2. Identify the maximum loss within the seasonal period. Then, have a look at the daily chart and the ATR(14) indicator.

    If the maximum loss is above the ATR(14) reading, round it up to the next round number and use it as worst-case-stop.
    If the maximum loss is below the ATR(14) reading, use the ATR(14) as your stop-width (rounded up to the next round number).
  3. Look at the average gain of the seasonal pattern, and place the take profit at this distance from your entry point.
  4. If the trade is not stopped out or it does not reach its take profit within the seasonal period, end the trade market on the closing price on August 12.

Looking at current market data, since the ATR(14) in #Bund_U9 on a daily time frame is currently trading around 60 ticks, while the maximum loss of the window was 176 ticks, our worst-case stop will be placed based on maximum loss 180 pips away from our entry price.

Meanwhile, the average gain of the seasonal pattern is 183 ticks within this period. So, after entering the trade on the closing price of July 15, we would add 183 ticks to get our take profit level.

Source: Admiral Markets MT5 with MT5-SE Add-on #Bund_U9 CFD Daily chart (between March 22, 2018 to July 05, 2019). Accessed: July 05, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the FGBL increased by 12.3%, in 2015, it increased by 1.3%, in 2016 it increased by 3.6%, in 2017 it decreased by 1.5%, in 2018, it increased by 1.1%, meaning that after five years, it was up by 17.9%.

Check out Admiral Markets' most competitive conditions on the #Bund and start trading from as low as 3 ticks. To test Admiral Markets #Bund offering in combination with the described strategy above register for a free demo account today and experience the live market risk free!

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Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
  3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
  4. To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
  5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
  6. The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
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