Weekly forex strategy

weekly forex

One of the principle motives why most Forex investors lose money is a failure to trade primarily based upon longer-term, higher time frames together with the weekly time frame. This article explains why and the way to use the choices weekly time frame in your Forex buying and selling, and outlines each guidelines and actual historical performances of a few weekly time body buying and selling strategies that you would possibly use or adapt.

What is Time Frame in Forex Trading?

“Time frame” in the Forex market trading approach the unit of time that the fee chart you are viewing is primarily based on. For instance, in a weekly time frame Japanese candlestick chart, every candlestick represents one week of time. In a 5-minute time body Japanese candlestick chart, every candlestick represents 5 mins of time. Shorter time frames show an awful lot greater detail of price movement over the years, however longer time frames display wider, longer-term images of developments and levels in the price.

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Why You Should Use the Weekly Time Frame in the Forex market Trading 

The best, worthwhile, and effective tool you may use to trade the Forex market is to take note of whether or now not there’s a long-term trend or variety in any foreign money pairs or crosses, particularly the choices predominant pairs; and in that case, wherein direction that fashion is going. Then, make sure that you alternate within the identical path as that fashion, or alternate reversals from assist and resistance whilst there may be no trend and the rate is ranging. Use a better time frame rate chart inclusive of the choices weekly time body to make those calls.

While you can use a day by day time body chart for the identical cause, you have to use the choices weekly time frame in the Forex market buying and selling for this because it’s far less complicated to judge the very long-term charge motion at a glance there. It is likewise an amazing concept to drill down and use at least one shorter time body chart as well, inclusive of the 4 hour or hourly time frames, to first-rate-song your trade entries and exits to cause them to more particular, which also way extra profitable.

How to Measure Trend with the Weekly Time Frame 

The reason why the weekly time body is the choices quality time frame for buying and selling Forex is because historical Forex statistics suggests that once the charge is higher than it become several months ago, it is much more likely to upward thrust than fall, and vice versa whilst the choices charge is lower than it turned into several months ago. So, if you pull up a weekly chart, one clean trick you may do to create the nice trend indicator, is depend returned 13 and 26 weeks from the choices cutting-edge weekly candlestick. Is the choices rate now higher than it changed into at those times? If yes, you have got an extended-time period uptrend. If it changed into lower at each, you have got a protracted-term downtrend. If the choices outcomes are blended, you don’t have any fashion. Forget all the fancy the Forex market indicators – this is a technique which is both very simple and powerful.

For instance, the weekly time frame chart of the choices EUR/USD foreign money pair under indicates the choices cutting-edge weekly candlestick, on the choices a long way right, in reality beneath the outlet expenses of the candlesticks from 13 and 26 weeks ago. So, there is a clear downtrend, and this week buyers can search for brief trades in this forex pair.

Weekly Time Frame: Long-time period Downtrend

In another instance, the weekly time frame chart of the choices GBP/USD forex pair beneath shows the choices contemporary weekly candlestick, on the far proper, remaining above the opening price of the candlestick from thirteen weeks ago, but also underneath the outlet fee of the choices candlestick from 26 weeks ago. So, there is no lengthy-term trend, and subsequent week traders who want to alternate this currency pair ought to look to change reversals at aid and resistance tiers.

Weekly Time Frame: No Long-term Trend

Should You Use Only One Time Frame in Forex Trading? 

Although a weekly time body chart can show you a buying and selling facet, in all except very restricted circumstances (explained in extra detail below within the “Trading the Forex market with the choices Weekly Time Frame Only” segment), it isn’t smart to change using the choices weekly time frame by myself. In truth, the use of just a single time body to alternate Forex is often a horrific idea, some thing time frame you would possibly choose. However, the use of higher time frames including the choices weekly price chart, can at the least let you know whether there’s a protracted-term trend and in that case, in what course.

There are numerous motives why buying and selling the usage of the choices weekly time frame on my own is usually a horrific idea:

It is just too lengthy-term and sluggish to apply on its very own. While you may easily preserve a terrific exchange open on a short time body which includes 5 minutes for 50 candles, if you try holding a change open for 50 weeks, you’ll stumble upon many issues.

Some Forex brokers impose a time limit on the choices length of trades, forcing you to shut an open exchange after it has been open for typically a few weeks or months. Few agents put it on the market this truth- you have got to check the choices small print or ask the broker without delay to find out..

All Forex agents, unless you’ve got an Islamic the Forex market dealer account, will both price or pay you a small amount based on the dimensions of your trade and the interbank hobby (“tom/subsequent”) prices of the respective currencies in the pair. Usually, it is a price and now not a credit score – the choices device is biased towards the dealer and is a manner Forex agents could make money quietly from long-time period buyers. Even if the rate is normally small, inclusive of 1 / 4 of a pip in keeping with day, if you hold a trade open for a long term those overnight swap prices add up and can genuinely eat away at your income.

Professional traders constantly use a combination of long-term and quick-term time frames. Typically, expert investors could have three timeframe screens open for whatever they’re buying and selling displaying the choices day by day, hourly, and five-minute time frame charts.

Multi Time Frame Trading with the choices Weekly Time Frame 

Multiple time frame analysis is definitely looking at two or greater price charts for the identical Forex foreign money pair or pass or different instrument, at the same time. You make a a couple of time body analysis through looking first at a better time frame and using that chart to decide whether the price is trending (and if so, in what path) or ranging, and additionally perhaps to pick out clear guide and resistance levels. It is a pinnacle-down evaluation, due to the fact once you have that data from the choices better time body, then you definitely use a lower time body to alternate from that evaluation, so that you can typically get you extra particular change entries and exits which should maximize your reward to hazard ratio.

There are some precise Forex buying and selling strategies which have historically been worthwhile on the choices weekly time body, outlined below. You can use a shorter time body as a device to exchange those techniques more successfully.

The outcomes special underneath are from lower back assessments carried out on 16 principal and minor Forex currency pairs over a very lengthy period of just about twenty years, from 2001 to 2020. Thousands of samples have been taken, growing the statistical validity of the choices back check.

When a Forex foreign money pair or move ended a week at its maximum or lowest weekly close for 26 weeks (identical to 6 months), in 51.10% of instances the following week closed further in the route of that breakout. However, on average the next week closed in opposition to the choices trend by using zero.04%.

If we take best the choices USD currency pairs from the above example, in 53.94% of instances the next week closed further within the direction of the fashion. On common, the next week closed further within the course of the fashion by zero.02%. Although this 2nd statistic isn’t encouraging, by using use of a pretty tight tough prevent loss, trading lengthy-time period breakouts in USD foreign money pairs will be made right into a worthwhile trading approach, however you need to use a shorter time frame to make your exchange entries and exits extra profitable.

Example change: reusing an earlier image, we see the EUR/USD forex pair with a weekly candlestick making the lowest weekly close in 26 weeks – you may see there isn’t a unmarried preceding candlestick within the rate chart with a lower close. Next week, look for quick trades on a shorter time frame inclusive of the choices hourly or four-hour time body.

Weekly Breakout Trend Strategy: Short Trade Entry

This approach and all of the following strategies rely on suggest reversion. “Mean reversion” manner that the price will in all likelihood revert back to its average after a sustained directional motion faraway from the average. You change imply reversion just via watching for a flip of path back towards the choices average and beginning a role focused on the choices average.

When a the Forex market forex pair or move ended per week either above both its costs from thirteen and 26 weeks in the past, or underneath both, however the week’s price movement from open to close become in opposition to that trend, in fifty one.71% of instances the following week reversed and went on to close further in the path of that trend. On average the next week closed with the choices trend by using a further zero.09%, so “purchase the dips” appears widely to paintings better in Forex than buying and selling breakouts.

If we take most effective the USD currency pairs from the above example, the outcomes do not improve. This method that the choices records indicates that for USD foreign money pairs, the win fee has been better buying and selling breakouts, but the common alternate expectancy for the subsequent week become better when “shopping for the choices dips”.

Example change: we see the EUR/USD foreign money pair with a weekly candlestick remaining up from its open – the green candlestick on the choices far right of the choices chart. However, this close is underneath the outlet charges of the choices weekly candlesticks of both thirteen and 26 weeks in the past, so there is an possibility here to “sell the rally” (similar to “purchase the choices dip”). Next week, search for brief trades on a shorter time frame together with the hourly or 4-hour time body.

Weekly “Buy the Dips” Trend Strategy: Short Trade Entry

There also are two weekly buying and selling strategies with accurate tune information which could extra accurately be used with simplest the weekly time body.

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Trading with the choices Weekly Time Frame Only 

These strategies produce trades which can be supposed to be entered simply as every week ends, and held until the same time subsequent week, without a forestall loss. This can of path be traded more precisely by the usage of a shorter time body as nicely.

When a Forex currency pair or move ended a week either above both its fees from thirteen and 26 weeks in the past, or under each, but the week’s fee motion from open to shut become against the choices fashion via at the least 2%, in fifty five.54% of instances the subsequent week reversed and went on to close similarly in the direction of that fashion. On common the next week closed with the choices trend via a similarly zero.41%, so this is historically the high-quality-performing buying and selling method outlined within this article.

This method does now not produce trades very often, as a directional motion in the Forex market of extra than 2% from a weekly open to a weekly close is fantastically rare and has tended to take place in only approximately three% of samples.

This strategy is powerful, because it’s far based now not best upon the market’s tendency to each fashion and revert to its suggest, however additionally upon volatility clustering.

Example alternate: we see the GBP/AUD foreign money pass with a weekly candlestick closing down from its open – the choices purple candlestick on the a ways proper of the rate chart underneath. By dividing its last fee by its beginning fee, we see the end result is more than 1.02, meaning we’ve a robust enough circulate to generate an entry sign. Also, this near is above the opening expenses of the choices weekly candlesticks of each 13 and 26 weeks ago, so there is an opportunity here to “purchase the dip”. You ought to either simply enter lengthy right here simply before the week closes, or next week, look for long trades on a shorter time frame including the hourly or four-hour time frame.

Weekly “Buy the choices Strong Dips” Trend Strategy: Long Trade Entry

A again-test fairness curve of this approach the use of weekly actions from open to close extra than 2% in fee trading sixteen Forex currency pairs and crosses from 2001 to 2020 is proven under. Trades had been hypothetically entered at the choices quit of a qualifying week and held until the next week’s close. Spreads and overnight financing payments/costs had been no longer blanketed.

Weekly “Buy the choices Strong Dips” Trend Strategy: Equity Curve

This method is precisely the same as the preceding method, just without the fashion element.

All you are looking for is for a weekly candlestick to shut with a charge motion from its open to close of at least 2%. Then you input a exchange within the contrary course and sell at the choices end of the next week, irrespective of the choices trend. In 50.73% of cases the subsequent week reversed path and closed up. On common the next week changed into a winner via 0.20%.

Example exchange: the instance above can be used as illustration; you simply don’t need to check whether or not the charge is above or below any previous candlesticks: a circulate from open to shut extra than 2% is sufficient to trigger a exchange access signal.

Final Thoughts 

Forex investors will locate they are able to trade a whole lot more profitably by using the use of the weekly time body to find trending or ranging conditions, after which trading in keeping with the ones conditions by drilling all the way down to a shorter time frame to execute specific entries and exits. The four-Hour or 1-Hour time frames are ideal.

In the Forex market, traits have a tendency to be maximum appropriately identifiable over 3 months and 6 months.

Traders trying to exchange a strategy the use of best the choices weekly time body are nicely cautioned to change without leverage, and additionally to recollect the use of a constant difficult forestall loss, as the maximum drawdown of this strategy on sixteen Forex foreign money pairs and crosses found during the last twenty years was about 38%.

How to apply the choices weekly time frame in Forex buying and selling?

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