No Reason

noreason

BarroMetrics Views: No Reason

One of the very valuable lessons I learned from Pete Steidlmayer is I should have a reason for every trade, every entry. And when that reason is no longer viable, I should exit.

Today, the USDCAD provided a classic example of his teaching as well as illustrating why the hours 4:30 am to 7:00 am HK (16:30 to 19:00 EST) has become a dangerous time.

Let’s first consider the rationale behind the ‘dangerous comment’.

I must admit that it’s more a suspicion than proven stats. But, the ‘suspicion’ has been serving me to good stead.

I first made mention of ‘pattern’ in “Slow, Very Slow“. I then brought it up again in “Defended Levels“.  Today, we saw it in the USDCAD.

So, what’s the pattern? It tends to differ from pair to pair. But, its essential conditions are:

  1. A strong directional move between 16:30 and 19:00 EST; and
  2. A range that in a few minutes (5 to 60) that equates to at least 80% of the mean.

I was looking to enter the USDCAD. Nowadays, I ask: “are there any DPs (danger patterns) I ought to be aware of?

Just as well I asked. Figure 1 shows the pattern. I have used the 290-min so as to be able to show the prior occurrences; but, the characteristics are best seen in a 30-min or lower timeframe.

Figure 1 shows the pattern. I have used the 290-min so as to be able to show the prior occurrences; but, the characteristics are best seen in a 30-min or lower timeframe.

There were two occasions when the USDCAD  had had a daily range of less than 50% of mean coming into the end of the day. One each occasion, the pair spiked to new highs and then…….

……….moved down to at least 80% of mean range. Then, over the next few days, the USDCAD rallied back to the breakdown.

There was one occasion (09-21) when the initial range was larger: 84 pips. I took that day to be the start of the ‘trial’ for those trading the pattern to see if it had a real-time edge.

Today I saw the pattern affect my trading. Going into 17:00 (EST), the range was 33 pips (mean is 120). The pair then pushed to new highs followed by a drop of 116 pips in 90 mins. (Figure 2). Today though, the rally came almost immediately.

The USDCAD is now back to where it was before the breakup and breakdown.

Turning to the ‘no reason’ aspect of this piece – tomorrow……

2016-10-25_09-16-38-usdcad-290-min

FIGURE 1 USDCAD 290-min

2016-10-25_09-08-03-usdcad-30-min

FIGURE 2 USDCAD 30-min

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