Ever wonder if there are any relationships in market behaviour which happen often enough to be exploitable? For profit, I mean. Probably not many, and those that happen to working, only do so for some time. Just long enough for people to start risking money and even create entire trading strategies. An example would be the much vaunted (couple of years ago) correlation of CAD-JPY, or CAD altogether, with oil prices. More recently inverse correlation of DOW and EUR-USD has been hotly debated. Unfortunately, these are not viable long term strategies, they don’t last. It is very difficult to find something of this nature that could withstand the test of time.
Some time ago I noticed something interesting in market behaviour. It has to do with the way currencies close on Friday. If given pair ends the week strongly in one direction, chances are very good this will continue after Sunday open. This doesn’t happen all the time, but often enough for me to place an occasional trade. Continuation normally lasts first 4-6 hour of after weekend trading. This can’t be quantified with mathematical precision, but happens often enough to be of interest. The way some currencies acted on Friday I thought this relationship could be put to the test. Unfortunately, last 2-3 hour of trading negated this possibility.
This is how things turned out.
Swissy went on this crazy run which lasted few hours. Had the markets closed with candle marked “A”, or even an hour longer, I would be selling EUR-CHF at the open. Since move ran out of steam, the probabilities for continuation are just not strong enough any more. I brought it up because in the future subject will come up again.
As always on Sunday, gaps are in play if they happen, but I don’t see very many immediate opportunities on the time frames normally discussed here. Even Yen pairs, if they were to make up moves, most of them have resistance levels not far above most recent highs. So I’m leaving them alone for today (I think). One possible trade might be in EUR-CAD.
Want to sell it at 1.5980. Potential is small here, 80-90 pips, but I will give it a go and see what happens. Later in the week (maybe as early as tomorrow), will start looking for buys in JPY pairs as well as Pound crosses. For now, though, it is just gaps, short term beast trades. After that we’ll see how Europe opens.
Mike K.
Your views are very interesting and the observations you make often unique. Do you read a lot about markets? Books, magazines, etc. Which ones?
I read all the trading related magazines, “Futures”, “TASaC”, and so on. Books, it depends, if I find something interesting. Web based information is a little too disorganized. Any single source or website, doesn’t have much great info. One has to keep surfing, which is time consuming and tedious. Besides, most of the stuff one can find is very basic. Not that basics are wrong… I think ecerybody should be forced to review basics every now and then
Do you read “Currency trader”, the electronic magazine? Think it us published by the same people as Active trader. What do you think about it?
Looks like Franc is getting weaker. Hopefully it will continue….
Renata, yes, I read curremcy trader. Nothing wrong with it.
Heather, maybe. Much less volatility than i expected. In your shoes, I’d make sure the stop is in place.
Well, nice rally in GBP-CHF and. Recovered my losses and got out with few pips profit. Thank you for guidance. My size was too big and that’s why I was so nervous. Lesson learnt.
That’s great news, Heather. Excessive position size does that- induces stress.
yo, great name for site)))
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[...] speaking it has to do with continuation of Friday trend when market reopens on Sunday. This is most visible on Yen pairs, although sometimes applicable to [...]
[...] speaking it has to do with continuation of Friday trend when market reopens on Sunday. This is most visible on Yen pairs, although sometimes applicable to [...]