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Ushi · 05-26-2008, 11:28 AM

Here I hope to post low-risk trade opportunities learned over the years. Some are my own, others I have taken from elsewhere (free sources, credit given). I'm only posting what worked for me, but don't use them as trading signals!

Excerpt from: Beat The Forex Dealer, A. Silvani

THE FRIDAY TO SUNDAY EXTENSION

Another typical FX pattern that can be exploited by traders is the Friday to Sunday price extension. This simple yet by-and-large correct assumption is the fact that prices will open the new trading week (Sunday NY time) in the same in the prevailing direction as they closed on Friday evening. After the weekend, Sydney traders generally do not have the oomph or desire to reverse any meaningful decline seen in NY, and are therefore happy to see prices steadily drift in the direction NY left them until Tokyo comes online. Most of the time this behaviour is not something to actively trade, but rather something to keep in mind if nursing positions or entering a late Friday trade, and traders should not rely on a miracle reversal on Sunday to get them out of a jam. Once Tokyo and London enter the market the direction may be reversed, but often times those traders nursing losing positions will have already been stopped out.

After a Friday with extreme volatility, however, this typical pattern is enhanced and turns into a low-risk trade opportunity for traders. The reason this trade works is simple. On economic data-heavy Fridays, prices often end up several hundred pips away from where they started the day and leave Sydney dealers with a mess on their hands by the time they get to work early Monday morning. As they go through the motions of processing the outstanding orders that the moves in NY have created, this activity often shows up as a Sunday morning “bump” created by dealers trying to fill their orders in a thin market.

This scenario is illustrated above. A big economic number released in the NY morning causes prices to jump wildly in both directions (1). Eventually, the market settles on a direction and proceeds to follow it for the rest of the day, and once European traders go home liquidity quickly dries up and NY traders begin to plan their weekends. In this 3-5pm window, the price will thus slowly trickle in the same direction until the close of the week (2). Although you may have some late-minute stop hunting by dealers, it will be in the same general direction since the market is too thin to stage any kind of meaningful reversal. This window of opportunity enables traders to safely enter the market in anticipation of a Sunday extension, confident that they will not be stopped out before then. When Sydney opens the new trading week, the move is quickly extended a further 20-30 pips before settling in for the Tokyo open (3).

05-26-2008, 11:28 AM	#1 (permalink)
Ushi Junior Member Join Date: May 2008 Posts: 1 Thanks: 0 Thanked 0 Times in 0 Posts Rep Power: 0	Low-Risk Trades Here I hope to post low-risk trade opportunities learned over the years. Some are my own, others I have taken from elsewhere (free sources, credit given). I'm only posting what worked for me, but don't use them as trading signals! Excerpt from: Beat The Forex Dealer, A. Silvani THE FRIDAY TO SUNDAY EXTENSION Another typical FX pattern that can be exploited by traders is the Friday to Sunday price extension. This simple yet by-and-large correct assumption is the fact that prices will open the new trading week (Sunday NY time) in the same in the prevailing direction as they closed on Friday evening. After the weekend, Sydney traders generally do not have the oomph or desire to reverse any meaningful decline seen in NY, and are therefore happy to see prices steadily drift in the direction NY left them until Tokyo comes online. Most of the time this behaviour is not something to actively trade, but rather something to keep in mind if nursing positions or entering a late Friday trade, and traders should not rely on a miracle reversal on Sunday to get them out of a jam. Once Tokyo and London enter the market the direction may be reversed, but often times those traders nursing losing positions will have already been stopped out. After a Friday with extreme volatility, however, this typical pattern is enhanced and turns into a low-risk trade opportunity for traders. The reason this trade works is simple. On economic data-heavy Fridays, prices often end up several hundred pips away from where they started the day and leave Sydney dealers with a mess on their hands by the time they get to work early Monday morning. As they go through the motions of processing the outstanding orders that the moves in NY have created, this activity often shows up as a Sunday morning “bump” created by dealers trying to fill their orders in a thin market. This scenario is illustrated above. A big economic number released in the NY morning causes prices to jump wildly in both directions (1). Eventually, the market settles on a direction and proceeds to follow it for the rest of the day, and once European traders go home liquidity quickly dries up and NY traders begin to plan their weekends. In this 3-5pm window, the price will thus slowly trickle in the same direction until the close of the week (2). Although you may have some late-minute stop hunting by dealers, it will be in the same general direction since the market is too thin to stage any kind of meaningful reversal. This window of opportunity enables traders to safely enter the market in anticipation of a Sunday extension, confident that they will not be stopped out before then. When Sydney opens the new trading week, the move is quickly extended a further 20-30 pips before settling in for the Tokyo open (3).