How to trade seasonal patterns in Bonds, today: German Bund Future (FGBL)

With the ECB rate decision on September 12, the German Bund Future will be on the agenda of many traders around the world.

After the remarks from Finnish ECB member Olli Rehn, who said in an interview with the Wall Street Journal on August 15, that "it is important that we (the ECB) come up with a significant and impactful policy package in September", it seems that the ECB is more and more likely to come out with a very big monetary stimulus package.

Such a step could be seen as bullish for the German Bund Future, since yields should be expected to drop further into negative territory.

That said, a seasonal bullish pattern in FGBL comes into play. It has developed over the last 21 years between September 16 and 30, and gives us a chance to formulate a strategy to trade the German Bund Future.

Seasonal Pattern in FGBL

The key parameter of this bullish seasonal pattern is as follows: between September 16 and 30, FGBL saw an average gain of 123 ticks for 17 of the past 21 years.

In the remaining four years it dropped on average only 46 ticks, while the maximum loss was 137 ticks and the maximum drawdown 138 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 September 16 (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 September 30.
   

Looking at current market data, since the ATR(14) in #Bund_U9 on a daily time frame is currently trading between 90 to 100 ticks, while the maximum loss of the window was 137 ticks, our worst-case stop will be placed based on a maximum loss 137 ticks away from our entry price.

Meanwhile, the average gain of the seasonal pattern is 123 ticks within this period. So, after entering the trade on the closing price of September 16, we would add 123 ticks to get our take profit level.

Source: Admiral Markets MT5 with MT5-SE Add-on #Bund_U9 CFD Daily chart (between May 28, 2018, to September 3, 2019). Accessed: September 3, 2019, at 10:00 PM 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 #Bund and start trading from as low as 3 ticks only. To test Admiral Markets FGBL offering in combination with the strategy described above, register for a free demo account today and experience the live market risk-free!

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