Why You Shouldn’t Long Euro On Monday
Many traders who took the plunge into trading forex do not know about many basic biases that are very useful but not very obvious. Not buying euro on Monday is definitely on the top of this list. I will explain why you should be aware of this and how to take advantage of it.
Cold Hard Facts
Following table shows the winning percentage and net profit/loss in pips on buying Euro Dollar (EUR/USD) at the start of the week (Sunday 5 pm Eastern Time) and exit 24 hours later. 1-pip discount for both entry and exit are taken from the net gain to account for slippage.
Euro does not perform on Monday is very obvious from the table above.
Exceptions Tell The Tale
The only exceptions to the norm are the years 2002 (start of the latest rounds of US debt ceiling crisis), year 2008 (messed up bubble of mortgage backed securities) and year 2012-13 (QE infinity). It tells us that euro can only rise marginally on Monday when the world is in a mess. Even during those net positive years, however, the winning percentage is far from desirable and the total gain is way too small.
Since QE infinity is winding down, it is just a matter of time that euro will likely snap back to its norm.
Take Advantage Of The Bias
As I have shown in my ebook Forex Daytrading Time Map Vol. 1, Monday is often the low of the week. Thus it is a no brainer to wait for Monday to bottom out first if you are bullish and interested in going long.
Once euro started selling on Monday and failed to bounce by the end of the trading day, it would often find a bottom, at least temporarily, on Tuesday early in the day.
(Note: In Forex time, early Tuesday is actually the 8 hour slot starting 5 pm Eastern Time on Monday in United States. It is called early Tuesday because that is midnight in central Europe. Read all about it here, The Forex 24 Hours.)
What’s the point of buying euro at the beginning of the week to take the unnecessary heat from the panic sellers?