DID YOU know that 60 per cent of weekly price highs or lows will occur either on Friday or Monday? This is the common pattern for a currency pair like euro-dollar.
What this tells us is that, if we spot a reversal on either Friday or Monday, the following five trading days will probably follow the momentum of the reversal. Therefore, if you see euro-dollar trade lower on Monday morning and price closes lower for the day, it’s fairly likely that price will keep on trading lower until the end of the week.
The likelihood of getting a major high or low on Monday or Friday is about two and a half times higher than for any other day. This is a pattern that is fairly consistent across many currency pairs, and you could also use it to judge whether you should wait before entering a position until the end or start of the week.
Say that you think euro-dollar has fallen a bit too much given fundamental drivers. In that instance, not entering until the Friday or Monday is usually a good idea. Of course, considering whether to enter solely on the back of the day of the week is not a good idea, but if your fundamental or technical rules point to entering the market and it’s either Monday or Friday, then there is a greater likelihood that you will be right.
Next time you trade, see how this rule could affect your trading.
Alejandro Zambrano is a currency strategy analyst at DailyFX.com. He leads a monthly educational seminar for FXCM live clients at http://bit.ly/PremiumEDU
You can follow him on Twitter @AlexFX00