NZD/USD Risk Sentiment Trade

Entry Logic

• Entry triggers when the S&P 500 is in a strong uptrend and the NZD/USD is above the 20-day moving average.
• Confirmation requires a new 10-day high.
• Timeframe is the daily chart.
• Location is a breakout to new highs in a risk-on environment.
• Market condition must be a trending market.

Exit Logic

• Profit target is the previous month's high.
• No scaling out.
• Trailing stop is the 20-day moving average.
• Exit on signal failure if the price closes below the 20-day moving average.
• Exit on an opposite signal if the S&P 500 enters a downtrend.
• No time expiration.
• Exit on momentum loss if the price fails to make a new high for 5 days.

Stop Loss Structure

• Hard stop is placed below the 20-day moving average.
• No soft stop is used.
• Maximum dollar loss is 0.8% of account equity.
• Maximum percent loss is 0.8% of account equity.
• Structural stop is placed below the most recent swing low.

Risk Management Framework

• Risk per trade is 0.4% of the account.
• Maximum daily loss limit is not applicable for this long-term strategy.
• Maximum weekly loss limit is not applicable.
• Maximum drawdown allowed is 12%.
• Risk-reward ratio requirement is a minimum of 1:2.

Position Sizing Model

• Sizing is based on a fixed fractional model (0.4% of account per trade).
• No volatility adjustment is used.
• Conviction sizing is not used.
• No scaling in.
• No scaling out.

Trade Filtering

• Avoid trading when the S&P 500 is in a downtrend.
• Requires a clear uptrend on the daily chart.
• Instrument is NZD/USD.
• This is a swing trading strategy.
• Avoid trading during major New Zealand or US news releases.

Context Framework

• Trend direction is determined by the 20-day moving average and the trend in the S&P 500.
• Price must be above the 20-day moving average.
• Price should be making higher highs and higher lows.
• Location is a breakout to new highs.
• Higher timeframe (weekly) should be in an uptrend.

Trade Management Rules

• This is a set-and-forget strategy.
• The trailing stop will manage the trade.
• Do not add to the position.
• Be prepared to hold the position for weeks.

Time Rules

• This is a swing trading strategy, so time of day is not relevant.
• The focus is on the daily chart.
• No session-specific notes.

Setup Classification

• A+ setup: Strong uptrend in the S&P 500, clear uptrend in NZD/USD, and a new 10-day high.
• A setup: Moderate uptrend in the S&P 500 and a clear uptrend in NZD/USD.
• B setup: Ranging S&P 500.
• C setup: Downtrend in the S&P 500.

Market Selection Criteria

• Instrument is NZD/USD.
• Requires a clear correlation with risk sentiment.
• Volatility can be moderate.

Statistical Edge Metrics

• Expected win rate is 60%.
• Average win is 2.5R.
• Average loss is 1R.
• Profit factor is 2.5.
• Expectancy per trade is +1.0R.

Failure Conditions

• Strategy fails when the correlation between NZD/USD and risk sentiment breaks down.
• Avoid trading when there is a major shift in global risk sentiment.

Psychological Rules

• Be patient and wait for the setup to align.
• Trust the correlation between the currency and the stock market.

Advanced Components

• The correlation with the S&P 500 is the key advanced component.
• No other filters are used.
• Multi-timeframe alignment with the weekly chart is helpful.

Location

• Strongest when global risk appetite is high.
• Weakest during global recessions and financial crises.
• The global macroeconomic environment is a key factor.