EUR/USD - a weekend strategy for fun

Discussion in 'Strategy Building' started by OddTrader, Oct 9, 2005.

  1. Do something in weekends for fun!

    Purpose: To test and develop a new trading strategy targeting the potential price movements over weekends (sometimes producing Gaps?), entering on Friday at 12:00EST (i.e. 16:00GMT) and exiting on Sunday at 20:00EST (i.e. 0:00GMT).

    Spread: During weekends Oanda usually quotes a 10 pips spread; that means there is potentially a constant of about 4 pips profit to be automatically generated at the time the 10 pips spread reduces to 2.0 pips at 20:00EST.

    Backtesting results: Available only for last weekend
    30-2 Oct Sell 1.2020 Exit 1.2026 Move (Not exactly P/L) -6

    Start testing: This weekend -
    8-10 Oct Buy 1.2114

    All comments/ suggestions (particularly from those who have got experience in trading similar weekend strategies) that are directly related to this development would be welcome.
  2. Some corrections (due to the 1.2020 was for 29 Sep EST time which is 30 Sep ESTA time I live) are required as follows:

    Backtesting results: Available only for last weekend
    30-2 Oct Sell 1.2059 (High 1.2066 Low 1.1997) Exit 1.2026 Move (Not exactly P/L) +30 pips (Favourable)

    Start testing: This weekend -
    7-9 Oct Buy 1.2114
  3. What happens is, you'll usually only get filled on your trade when you don't want to. How much are you willing to risk the position going against you, just to capture that spread? The weekend moves can be rather sharp.
  4. One of the key elements in this strategy is Oanda would limit our maximum loss according to our StopLoss orders.

    Another key element is we would try to take advantage of capturing the propable sharp and big (gap) moves for some weekends.

    The combination of the above means the strategy when trading EUR/USD could have a higher Risk/Return ratio than other normal trades with non-weekend types.

    Some traders think usually the R/R ratio for trading EUR/USD would be lower than for trading others.

    We may try initially risking 25 (average 20) pips and expecting 50 (average 40) pips for some profitable weekends (while our capital with Oanda is siting still for doing nothing), that could be a reasonable guess, imo.

    By the end of this thread, probably we could derive a proper R/R ratio after calculating an average favourable move (potential profits) vs average(?) averse move.
  5. As the system overall would be still breakeven while trading with 50% losing, 30% winning and 20% breakeven trades, the importance of relying on long/short directions could be somehow relatively reduced.
  6. (High 1.2136 Low 1.2099) Exit 1.2129 Move +15 (Aversion -15)
  7. More backtesting results:

    16-18 Sep Buy 1.2214 StopLossHit -25

    23-25 Sep Buy 1.2076 StopLossHit -25
  8. Q

    Weekend Stop and Limit Orders

    Stop and limit orders during weekend and holiday hours work different during times when some or all of the markets are closed. When trading is halted due to a holiday or weekend, it is important to note how stop and limit orders are treated.

    If the currency cross opens at or beyond your stop or limit rate then your stop or limit will be filled at that opening market rate. This means that your stop orders may be filled at rates that are poorer than the order rates. Likewise, your limit orders may be filled at rates that are better than the order rates.

    See the example below:

    EUR/USD closes at 1.2400 on Friday.
    GBP/USD closes at 1.7650 on Friday.

    You have a Buy Stop on EUR/USD at 1.2425.
    You have a Buy Limit on GBP/USD at 1.7625.

    When the market opens on Sunday the following are the opening market rates.

    EUR/USD 1.2436/40
    GBP/USD 1.7600/05

    Therefore, your EUR/USD Stop will be filled at 1.2440.
    Also, your GBP/USD Limit will be filled at 1.7605.

    You can see from the above example that leaving Buy Stop and Buy Limit orders over the weekend can cause unforeseen risks to forex traders.
  9. Q

    The right to trade whenever you want

    Common knowledge among equity investors says that time in the market trumps market timing. Try that strategy in the forex market and see how long you last.

    In currency trading the strategic value of a position is calculated more often in seconds or minutes than in days or weeks. Opportunity is defined as locking in your trade when you're ready, not your market maker.

    Many market makers advertise round-the-clock trading and 24/7 customer service. But virtually all of them close the trading book on Friday afternoon. Which is fine until it's Sunday morning and you've just fine-tuned your strategy, but you can't place your order.

    The hallmark of the forex market is volatility: it's a direct reflection of trading activity, momentary liquidity, and breaking news that can move prices in whole numbers, not just pips. You can't control volatility, but you won't profit by watching from the sidelines.

    For traders in a global market fueled by 24/7 news coverage, the sometimes market maker represents a tangible threat.

    While much of the industrial world has come to celebrate the weekend, events that drive currency prices have a way of ignoring the calendar. For example:

    * political and economic summit meetings
    * national elections
    * acts of terror
    * military confrontations and attacks
    * natural disasters
    * unnatural disasters—like assassinations, coups and hostage-taking
    * the fact that many countries don't take off on Saturday and Sunday

    #10     Oct 13, 2005