Trading strategy: EUR/USD 07h30 - 22h30

Description

The EUR/USD 07h30 - 22h30 trading strategy is a variant of the EUR/USD 07h30 strategy. These strategies attempt to benefit from the different world time zones and the ensuing variations in forex trading volumes. The strategy checks at two precise points in time, 07h30 and 22h30, if the EUR/USD is in the early stages of a trend. If a trend is detected a position is opened in the direction of the trend.

Note: this type of strategies which potentially offer trades at specific points in time (as opposed to strategies which require the trader to wait until a strategy generates a signal at a random point in time) are practical and popular.

 

  
Suitable for : EUR/USD
Instruments : Spot forex and forex CFDs
Trading type : Day trading
Trading tempo : Maximum 2 signals per day
The strategy :
Using NanoTrader Full : Manual or (semi-)automated

 

The strategy in detail

At around 07h00 GMT the European markets are near their opening times and trading volume in the EUR/USD starts to increase. At the same time the US is still asleep and the Asian markets are in their last one or two hours (Tokio, Hong Kong). In the hour(s) leading up to 07h00 GMT the EUR/USD, in a sense, begins its trading day. It is a good point in time to determine if a trend is starting. If a trend is starting, the probability is real that it will continue for some time when the EUR/USD trading volume increases in the subsequent hours.

At around 22h30 the European and US markets have wound down. Trading activity on the EUR/USD decreases. Traders sometimes consider this the point in time when the EUR/USD returns to its fundamental trend.

The EUR/USD 07h30 – 22h30 strategy is used in a 30-minute time frame.

When to open a position?

In order to determine if a trend is building the strategy combines three indicators: the SuperTrend, the MACD and the DMI. A buy signal is generated at 07h30 and 22h30 if all three indicators show a positive trend. A short sell signal is generated at 07h30 and 22h30 if all three indicators show a negative trend. If there is no unanimity across the indicators, no position is opened. Positions are opened at market price.

When to close a position?

The EUR/USD 07h30 – 22h30 strategy uses both a profit target and a stop. In addition there is a time filter: if a position is still open at 12h00 it is closed at the market price. This can be either the 07h30 or the 22h30 position. If the 22h30 position is still open the next morning at 07h30 no additional position will be opened. If the 22h30 position is still open at 12h00 it will be closed at the market price.

The profit target is small, 12 pips. The initial stop loss is a 48-period HighLow stop. This stop is relatively far from the entry price and thus serves as a security.

 

This example shows a buy signal at 22h30. A long position is bought at the market price. The profit target (green line) is not reached. The position is still open at 7h30 the next morning. As such the short sell signal at 7h30 is not acted upon. The position hits the stop (red line) and is closed with a loss.



 

This example shows a buy signal at 22h30. A long position is opened at the market price. The position is still open at 7h30 the next morning. At that time there is no additional signal (note: if there was a signal, it would not be acted upon). An hour later the profit target (green line) is reached and the position is closed with a profit.


 

This screenshot shows a back-test over about 2 ½ years. This strategy has a ratio of >80% winning trades combined with a fairly steadily rising equity curve.

 

Conclusion

The EUR/USD 07h30 - 22h30 strategy focuses on two particular points in time, the beginning of the day when volume in the EUR/USD picks up and the end of the day when volume winds down. In both cases a trend may be building. If a trend is detected a position is opened in the direction of the trend. The profit target is small but the percentage of positive trades is consistently high. This strategy is interesting for traders who like a trade at a particular point in time.

Practical implementation

In NanoTrader Full follow these steps:
  • Choose the instrument you wish to trade.

  • Open a chart with the template study "WHS EUR/USD 07h30 - 22h30".

  • Semi-automated trading? Simply activate the TradeGuard+AutoOrder or the AutoOrder function.