This last Sunday created a situation that had already been covered here couple of times before as weekend trading. I don’t necessarily advocate trading on Sunday afternoon/evening our time, sometimes viable opportunities are created. If somebody spends that time in front of computer anyways, then might as well try to make few pips, should right situation come along. Previous explanation was not the best and lacked good example, something I can correct now with very recent charts, from just few days ago.
Generally 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 AUD and NZD. If this relationship takes place, strong closing Friday, followed by extension on Sunday, chances are good that this move will run out of steam fairly quickly. My observations indicate 4-6 hours after most brokers open for business. That is the time window during which those early trends have tendencies to revers or pause. I’m looking for strong reversal, using hourly charts.
First element of the set up is price behavior on Friday. Price should have a decent size range for the day and close near daily extreme, either high or low. After the open, trend must continue. Gaps are not necessary to form. If they do, gap trading rules can be used. What we want to see is an acceleration of the pace at which price is advancing. This can be determined by increase in size of hourly bars/candles, lasting 2-4 hours, if hourly charts are analysed. Finally, strong reversal pattern must form. Since I use candlesticks, hammers/hanging man and engulfing or piercing patterns are my favorites. These must be dominant candles, that clearly stand out. Example from last Sunday.
GBP-JPY closed Friday down and almost at the daily extreme (1). This was followed by a continuation on Sunday. We can see price accelerating and painting bigger hourly candles (2). Move ends with a variation of a hammer, when price bounced off 140 level. Closing of this very candle (A) is entry for this set up, while the lowest registered price during that time span provides stop level. Objective is marked by the open or a minor high nearest to the open. In this example it was about 143.55.
Another example from last Sunday is on this chart of NZD-JPY. Here also we can see Friday closing in the neighborhood of daily extreme(1), followed by strong trend reemerging after the weekend(2). Price formed huge hammer pattern (A), which provided entry at the end of that candle, with a stop at its lowest point. NZD-JPY drifted down some more, but didn’t reach stop level. Price finally turned and proceeded to objective set at the daily open, or rather minor high created around that time.
I didn’t take those trades, because, in a very uncharacteristic manner, I was away from computer. Didn’t look at charts until much later in the evening, when it was too late to try to take advantage of this set up. Couple of JPY pairs were stronger than others and I went for small breakouts above the Sunday open.
CAD-JPY unfolded in almost exactly the same fashion as the crosses before. The same set up was present. Later on in the day I decided to go long once the price moved above open. Target was small, I closed it after 55 pips and returned to relaxation.
Set up described above is fairly reliable. It doesn’t happen every weekend, but is worth to be on a lookout for. Just like most of discretionary trading situations, it takes some time to train the eye to recognize it as it unfolds and it will be a little different every time it forms. With a little practice, however, it is surprisingly easy to find. It normally provides good risk to reward ratio, as well as high probability of of being profitable. It could be applied to 4H charts, but I find hourly graphs easier to interpret. BTW, AUD-NZD trade is closed, details in next post.
Mike K.
Very good concept, Mike. I don’t think it happens very often, but it also should be easy to spot, with the directives you wrote. It seems subjective, to some degree and probably takes some time getting used to.
Hi, how many of these different strategies or “set ups” do you use?
Michelle, just like any other non systematic strategy, you must learn to recognize it. This takes practice. print out charts and work on them.
Jess, for discretionary trading I only use 3-4 main strategies, but they have many variations. Over the years I worked on hundreds of different ways to trade and, on occasions, I dust off archives and use some of them.
I like your picture. Shows character!
Character? LOL! It shows I’m getting old, that’s what it shows.
[...] trends have tendencies to revers or pause. I?m looking for strong reversal, using hourly charts. More of Sunday evening set up. http://www.moneytec.com/forums/ [...]
[...] time zone. In other words, few hours into trading after the weekend. I simply called it the Sunday evening set up, because it is centered on the specific time of the week. Strategy is typically used on Yen pairs, [...]
[...] like last week, I’m watching for for possible Sunday evening set up. Once again my focus is on CAD-JPY. This cross looks more promising othan other Yen pairs, having [...]
[...] For now focus is on shorter time frames, more typical for me, hourly and 4H charts. Like the Sunday evening set up, which was present last [...]
[...] strong closing of JPY pairs, I will also look for “Sunday evening set up“. If these moves continue for few hours, strong reversal candle on hourly chart could a [...]
[...] had a nice boost on Friday, closing strongly for the week. This creates possibility for a Sunday evening set up trade, something that has not been happening lately. Detailed description can be found by following [...]
[...] looking for today. Some of the more promising candidates are NZD-JPY, AUD-JPY and EUR-JPY. Read on how this set up works. Also, gaps can happen, as they have been for weeks now, hopefully bringing additional additional [...]
[...] Friday many currency crosses closed at or near daily extremes. This might bring Sunday evening set up, as I call it. Virtually all Canadian Dollar pairs, as well as most of Yen crosses should be [...]
[...] Hard to say if that calmed the markets, but things did settled down when Europe opened and into the US session. At least the currencies. The Asian part of the day proved to be the most volatile today, and, frankly, it shouldn’t be a surprise. With large moves on Wall Street before the weekend, Far East markets were simply “catching up” after Friday. This was demonstrated by the continuation moves in some currencies, primarily the Yen pairs. As soon as market opened, they turned lower with fairly large moves. Few hours into that, it was time to start looking for reversal trades. [...]
[...] a chance for them to turn into something bigger, but for trading purposes these short term set ups, described in more details in an earlier post. Currencies opened up on a slow note, but eventually there was an acceleration, followed by [...]
[...] a chance for them to turn into something bigger, but for trading purposes these short term set ups, described in more details in an earlier post. Currencies opened up on a slow note, but eventually there was an acceleration, followed by [...]
[...] them to turn into something bigger, but for trading purposes these short term set ups, described in more details in an earlier post. Currencies opened up on a slow note, but eventually there was an [...]