Monthly market cycles

tomorton

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Interesting idea (picked up from Stacey Burke Trading) that for EOD traders each calendar month can be viewed as a separate forex market cycle. This is because of the focus on monthly activity and performance of the major players in the market.

In tactical terms, the HL range of the first trading day of the month has disproportionate chart significance - a break of either H or L will usually set that market's direction for the next 3-10 days. Also, a false break of H or L which reverses within a few days usually leads to a highly impulsive move through the other extreme of the range.

Seems a rational principle, and the TA seems to corroborate it.

What do people think?
 
Rough and ready backtest on EUR/USD over 2015-16 suggests 20 trades triggered, of which 11 hit their profit target, just 3 hit their stops, while 1 long was manually closed at the low of the first session as a short was triggered on the same day. The remainder were closed on respective Day 10’s, 4 for a small loss, 1 for a small gain.

Using a set amount risked per trade, at 2% of total account value, this suggests a return of about 12%. This isn’t going to set the world alight, but two interesting points can be seen. One is the 11:3 ratio of trades that hit their profit target compared to those that hit their stop. The other is that 10 of the 11 winning trades were triggered the next session after orders were set: and 9 of the 11 went on to hit their profit targets within just 2 more sessions. So money would not be exposed to the market long. And the principle that the opening day of the month’s range means something seems well founded.
 
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