Trading strategy: EUR/USD 07h30
Description
The EUR/USD 07h30 trading strategy attempts to benefit from the different world time zones and the ensuing variations in forex trading volumes. The strategy checks at a precise point in time, 07h30, 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 a specific point 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 1 signal 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.
The EUR/USD 07h30 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 if all three indicators show a positive trend. A short sell signal is generated at 07h30 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 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. 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. A long position is opened at the market price. The profit target is reached several hours later and the position is closed at a profit.
This example shows a short sell signal. A short position is opened at the market price. Neither the profit target nor the stop are reached. The position is closed by the time filter at 12h00.
Conclusion
The EUR/USD 07h30 strategy focuses on a particular point in time, the beginning of the day when volume in the EUR/USD picks up and a new 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.
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.
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".
- Semi-automated trading? Simply activate the TradeGuard+AutoOrder or the AutoOrder function.