26d ago in Trading Strategies and AI
Trade analysis questions
Here are some key questions to guide your trade analysis. These questions are designed to structure your analysis in a way that directly informs the development of the v0 wireframe and app functionality, while also clarifying the core elements of each trade. By answering these, you’ll gain insights into the trade itself, identify specific features that the app will need, and ensure that your analyses are actionable.
General Structure for Trade Analysis
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1. Market Context:
What market dynamics are currently affecting this trade?
Example: What macroeconomic factors are influencing USD/AUD spreads? How is global risk sentiment impacting this trade?
What role do interest rates, yield curves, or currency fluctuations play in this trade?
Example: How does the USD yield curve interact with the AUD yield curve in this context?
How are cross-market spreads behaving?
Example: What’s the correlation between USD/AUD and other key indicators like commodity prices or bond yields?
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2. Key Relationships and Data:
What are the critical data points for this trade?
Example: Which specific spreads or yield curves are most important (e.g., 5y5y USD/AUD)?
What trends or anomalies are visible in the data?
Example: Are there any clear patterns (e.g., steepening/flattening) or unusual movements in the USD/AUD forward curve?
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3. Trade Structure:
What is the trade setup?
Example: Is it a directional trade (betting on yield curve shifts), or a relative value trade (comparing USD and AUD rates)?
What is the time horizon for this trade?
Example: Is it a short-term, medium-term, or long-term trade?
What is the entry point and target?
Example: What are the expected entry levels for the USD/AUD trade, and what levels are you targeting?
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4. Risk Factors:
What are the main risks to this trade?
Example: How sensitive is this trade to central bank policy changes, currency fluctuations, or macroeconomic surprises?
What are the tail risks or outliers?
Example: Are there any low-probability, high-impact risks (e.g., geopolitical events or commodity shocks) that could affect the trade?
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5. Execution Details:
How should this trade be executed?
Example: What are the ideal conditions for entering the trade? Are there liquidity concerns or execution timing issues (e.g., during central bank announcements)?
What is the exit strategy?
Example: Under what conditions will the trade be unwound (profit target, stop loss, time decay)?
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6. Hypothetical Performance and Backtesting:
What would have happened if this trade had been executed in the past?
Example: How would this trade have performed under past market conditions (e.g., during previous interest rate cycles or market shocks)?
What is the expected return for this trade?
Example: What are the projected returns based on current data? What is the expected profit/loss over the trade’s time horizon?
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7. Informing v0 Functionality:
What specific data inputs does the v0 wireframe need for this trade?
Example: Do you need real-time yield curve data, forward rates, or cross-market spread inputs for the trade analysis?
What outputs or charts would make analyzing this trade easier?
Example: Would a dynamic yield curve chart or correlation matrix help visualize the trade?
What user actions should the app allow?
Example: Should users be able to adjust forward curve assumptions or input different spreads to simulate outcomes?
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8. Reflection and Learning:
What did you learn from analyzing this trade?
Example: Did anything unexpected arise in the data that changed your perspective on the trade?
What additional tools or data would help improve this analysis?
Example: Do you need access to different market data (e.g., commodity prices or central bank forecasts) to enhance the trade?
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9. Feature Request for v0 (Based on the Trade):
What specific features should be added to v0 based on this trade?
Example: Do you need a feature to compare multiple currencies at once, or a tool to dynamically simulate yield curve shifts?
What improvements to the UI would make analyzing this trade easier?
Example: Would an interactive heatmap of correlation coefficients help visualize data more clearly?
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Example Applied to USD/AUD 5y5y Trade:
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1. Market Context:
Macro Factors: USD yield curve steepening, AUD influenced by commodity prices and central bank policy.
Interest Rates: USD and AUD 5y5y rates diverging based on inflation expectations.
2. Key Data:
Critical Data: 5y5y USD vs AUD forward curve.
Trends: Flattening in AUD curve due to commodity price shocks.
3. Trade Structure:
Setup: Relative value trade between USD and AUD 5y5y curves.
Time Horizon: 6 months.
4. Risk Factors:
Main Risks: Central bank surprises (e.g., rate hikes or cuts) and macroeconomic instability (commodity prices, inflation).
Tail Risks: Geopolitical risk in commodity-exporting countries (e.g., disruptions in Australia).
5. Execution:
Execution Timing: Enter after FOMC meeting and Australian CPI data release.
Exit Strategy: Unwind trade if AUD curve steepens unexpectedly.
6. Hypothetical Performance:
Backtest: Similar USD/AUD trades performed well during periods of central bank divergence (2015, 2018).
7. v0 Functionality:
Data Inputs: Input fields for 5y5y forward curves, with the ability to adjust rates and simulate future movements.
Outputs: Correlation matrix and dynamic curve charts showing divergence.
8. Reflection:
Learning: The AUD curve is highly sensitive to commodity prices, requiring continuous monitoring.
Additional Data: Need commodity price forecasts to better predict AUD rate movements.
9. Feature Requests for v0:
Functionality: Add a correlation matrix for comparing multiple cross-market spreads.
UI Improvement: Allow users to toggle between different currency pairs (USD/AUD, USD/JPY, etc.).
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Summary
This structured approach to trade analysis not only provides clarity on the trade itself but also informs the specific features that v0 will need to support. By asking these questions, you ensure that each trade analysis delivers actionable insights and clearly defines what functionality your app should offer.
Feel free to adjust these questions based on your analysis needs, and let me know how you’d like to refine them further!
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Trade analysis questions
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