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HOW TO INCREASE YOUR INVESTMENT TEN TIMES IN 4 TRADES WITH EUR/USD PAIR?

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For most forex traders, the best time of day to trade is the Asian trading session hours.

European currency pairs such as EUR/USD show the best results.

Most forex traders are more successful during the late US, Asian or early European trading sessions – essentially 2 PM to 6 AM Eastern Time (New York), which is 7 PM to 11 AM UK time.

Those profitability statistics can certainly vary on a day-to-day basis, but the patterns are impressively stable over the course of the year. But how does time of day affect the average trader’s profitability?

Range trading strategies can be summarized quite simply—buy low/sell high. If a currency has fallen and is trading at or near significant support levels, the range trader will often buy. If the same currency then trades higher and near important resistance, that same trader sells. This can work if price is not breaking major price levels and continues trading within relatively narrow ranges.


DO THE HOURS THAT I TRADE MATTER?

Yes, they matter a lot.

Euro/Dollar RSI Range Strategy Performance, Trading 24 Hours

TRADE RULES FOR THE RSI TRADING STRATEGY

Buy Rule: When the 14-period RSI crosses above 30, buy.

Sell Rule: When RSI crosses below 70, sell.

Yet once we factor in the time of day, things become interesting. We know that the Euro tends to move less through certain hours—let’s use that to our advantage and make a rule to trade only during low-volatility times.

This next chart shows the exact same strategy over the exact same time window, but the system does not open any trades during the most volatile time of day, 6 AM to 2 PM Eastern Time (11 AM to 7 PM London time). The difference is dramatic.

EURO/US DOLLAR RSI STRATEGY RESTRICTED TO TRADE BETWEEN 2:00 PM AND 6:00 AM EASTERN TIME

TRADE RULES FOR THE RSI ASIA RANGE TRADING STRATEGY

Buy Rule: When the 14-period RSI crosses above 30, buy.

Sell Rule: When RSI crosses below 70, sell.

Trade Filter: Only allow the strategy to open trades after 06:00 and before 14:00 Eastern Time.

By sticking to range trading only during the hours of 2pm to 6am, the typical trader would have hypothetically been far more successful over the past 10 years than the trader who ignored the time of day.

WHAT ABOUT OTHER CURRENCY PAIRS?

Of course, not all currencies act the same. For example, the Japanese Yen tends to see more volatility during Asian hours than the Euro or British Pound; these are the hours of the Japanese business day.

We simulated the same filter as we used with the Euro/US Dollar. The poor results speak for themselves.

We find that the time filters have historically worked well for European currency pairs such as the Euro/US Dollar and the US Dollar/Swiss Franc. The filters also work fairly well for the GBP/USD. We might range trade these currency pairs during the 2 PM to 6AM time window.

Unfortunately, our optimal time window does not work well for Asian currencies. Our tests of different time windows on the USD/JPY, AUD/USD, and NZD/USD have not produced a single positive equity curve over the past 10 years. This is due to the fact that these currencies are more often subject to large moves during Asia Session than the European currencies.

GAME PLAN: WHAT STRATEGY SHOULD I USE?

Trade European currencies during the “Off Hours” using a range trading strategy.

Our data show that over the past 10 years, many individual currency traders have been successful range trading European currency pairs during the “off hours” of 2 PM to 6 AM Eastern Time (7 PM to 11 AM UK Time).

Many traders have been very unsuccessful trading these currencies during the volatile 6 AM to 2 PM time period.

Asia-Pacific currencies can be difficult to range trade at any time of day, due to the fact that they tend to have less distinct periods of high and low volatility.

MODEL STRATEGY: RANGE TRADING WITH RSI ON A 15 MINUTE CHART

For our models, we simulated a “typical trader” using one of the most common and simple intraday range trading strategies there is, following RSI on a 15 minute chart.

Trade Rules for the RSI Asia Range Trading Strategy

Buy Rule: When the 14-period RSI crosses above 30, buy.

Sell Rule: When RSI crosses below 70, sell.

Trade Filter: Only allow the strategy to open trades after 06:00 and before 14:00 Eastern Time.
answered Jun 27 by lawallekan (140 points)

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