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Forex Analysis: When to Trade

Thu, Jun 29 2006, 08:45 GMT
by Scott Owens

FX Engines

Forex Analysis: When to Trade

One of the key elements of any trading systemis market timing. Many traders fail to account for timing when makingtrading decisions, and those who do often rely on their instinct ofmarket timing rather than empirical data. The sophisticated investoruses advanced timing techniques to optimize market entry and exit.

Analysis

• Hour: Which hours of the day will produce the best trades?
• Session: Which trading session has the most action?
• Day: What is the range for particular days of the week?
• Month: Do the days of the month differ?

Action

• Correlate your engines to optimal trading ranges
• Test your engines according to a specific entry schedule

When to trade? We wanted to be sure ourselves, so we took 4 yearsof historical tic data from a dealer and ran it through a rigorouseconometric analysis. The most basic results of that analysis show theimportance of understanding and employing timing in your entry and exitdecisions.

Hours of the Day

Average range in pips for the four majors, Eastern Time:

Trading Session

Average range in pips for the four majors:

Day of the Week

Average range in pips for the four majors:

Day of the Month

Average range in pips for the four majors:



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• Forex Analysis: When to Trade

Published on  Tue, Sep 5 2006, 10:31 GMT