How do calendar patterns apply to currency trading? Well, in this article, John goes through some patterns that he sees in the various currencies in relation to certain weekdays. Interesting... Here's the article:
Most traders have heard of seasonal patterns, something which is mostly associated with commodities. The foreign exchange market also has calendar patterns which influence trading, and just like in commodities, traders can take advantage of them to improve their odds for success and profits.
Monthly Patterns
Nearly all currency pairs have one or more months during which they have a directional tendency. There are three pairs in particular which have traded in the same direction during a particular month at least seven years in a row. AUD/JPY has risen in January, while USD/CAD has fallen in June and USD/JPY has dropped in August. In each case, the moves have been significant. Let?s take a look at USD/JPY as an example.
On average, USD/JPY has declined over 325 points each year since 1999 in the month of August, which translates to 2.80%. While the percentage does not seem extraordinary, when one takes leverage in to consideration, it is a different story. Had one shorted 100,000 USD/JPY at the start of each August and closed that position out at the end of the month, the total profit would have been in excess of $20,000 (not taking in to account interest carry). That is an outstanding return considering the margin requirement for a position like that is only $2,000. And this does not even consider compounding!
Weekday Patterns
For the short-term trader, there are also patterns of behavior which are based on weekdays. It is a little more complicated, however, than just saying buy or sell on Monday, for example. A secondary condition must be applied, which can be accomplished using the month. The result is patterns which take place on certain weekdays during a given month.
An example of this kind of pattern is GBP/USD on Mondays in December. The pound has risen 73% of the time on Monday during the last month of the year since 1999 (31 observations). The average move has been 40 pips. Assuming a 5 pip spread, a trader who entered traded this pattern over the last seven years would have booked over 1000 pips in profits, which translates to more than $10,000 if one took positions of 100,000 GBP/USD each time.
Trading the Patterns
The examples outlined above are just a couple of the patterns which can be found in the forex market. There are many worth incorporating in to one?s trading. Obviously, one strategy which could be employed is a simple enter-and-hold based on the pattern for a given month or weekday. That, however, does leave one open to the both in-trade draw downs, some of which can be substantial, and the simple fact that patterns do not always repeat every time, and sometimes change.
An alternative to enter-and-hold is to use calendar patterns to bias one?s trading. For example, a day trader could look for opportunities to buy in to weakness in GBP/USD on Mondays in December. Similarly, a swing trader could use short-term breakdowns to enter in to short trades in USD/JPY during August.
The trader looking to employ forex calendar patterns must utilize the same good risk procedures as are always necessary. This applies regardless of the strategy employed.
Three Reasons Why Forex Trading Is Great
Learn about some specific advantages of forex trading in this article by Pablo. He points out interesting observations about the predictable cycles that many currency prices go through... Heres the article:...Trading Using Multiple Time Frames
Note: there are many forex systems that trade with more than 1 time frame. Why? It is usually to accurately time the entry to make the trade a "high probability" trade. Some systems however only trade...Introduction To Forex Trading
This is an introduction into who the major players are in the currency trading market, in terms of the major countires, as well as what types of people and institutions play in the forex market. Heres...Forex Trading - Understand Your Principles
Forex trading has been growing rapidly among day traders since the 1990s, as day traders have seen the advantages that trading currencies can have over trading stocks. However, since there are fewer currencies...
Note:
All trading involves a high risk of financial loss, and the information on this site is for general information purposes only and is not financial advice in any form. See your own financial advice before taking any action.
All forms of trading involves risk of financial loss.
Note that this site may have paid advertising or commissions generated for referrals to products and services, and forex brokers made from this site.
See our disclaimer for further information.
Testimonials and trading results of products and services from some people or users of products, does not guarantee or indicate similar results from another user of that product or service.
For forex trading on autopilot, see the "Forex Autopilot" system.
Testimonial from their site:
“$67,000 In 6 Months As A Complete Novice”
“Even though I had absolutely no previous business or trading experience my profits have gone through the roof! I strongly encourage anyone who’s ever wanted to work from home to purchase this system.
(advertisements)
Latest Articles
0 comments:
Post a Comment