Session Seasonality | Forex Factory

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Session Seasonality

  • #1
  • First Post: Jul 11, 2018 2:58pm Jul 11, 2018 2:58pm
Do fx sessions hold any kind of seasonality?

For example does the asian session tend to be more bullish for the cable, is the European session more bullish for the euro?

Has anyone made any research in this area, if so can you provide me with links?

Thanks.
  • #2
  • Jul 11, 2018 3:28pm Jul 11, 2018 3:28pm
Heres what the EURUSD looks like selling @ 0800 gmt then closing the position @ 1600 everyday since 05-05-2003 thru to present. The selected line in blue indicates the strategy above excluding all fees and commisions. Other pairs are also shown along with buy and hold.

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  • #3
  • Jul 11, 2018 3:45pm Jul 11, 2018 3:45pm
Here is what our equity curve would look like buying the EURUSD @ 1300 then closing the position @ 2200 everyday since 05-05-2003 thru to present.

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  • #4
  • Jul 11, 2018 3:49pm Jul 11, 2018 3:49pm
By adding in fees an comms these simple strategies will obviously fall apart however, if for example a discretional trader is looking to take a long position on a pair it would be advantageous to trade at a time when there is statistically upward bias on a pair.
  • #5
  • Jul 11, 2018 4:01pm Jul 11, 2018 4:01pm
Heres what it looks like buying EURUSD @ 2200 then closing position @ 0900 the following morning. No trades were taken on Fridays to avoid weekend risk.

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  • #6
  • Jul 11, 2018 4:34pm Jul 11, 2018 4:34pm
Heres what a combination of 3 strategies would look like trading only in the direction of session bias without stops, fees and comms.

Notice how combining strategies has reduced our drawdown size and length which in turn has smoothed our equity curve.

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Correlation matrix of the 3 straggles above.

Attached Image
  • #7
  • Jul 11, 2018 6:55pm Jul 11, 2018 6:55pm
Interesting discussion.
Why are you looking at only bullish moves? I have always tried to trade the pairs that are more likely to move (up or down) in the session where that countries traders are more likely to trade, e.g. Japan, Australia and New Zealand in the Asian session, however I have no statistical evidence that this is correct - only the fact that news affecting those countries is more likely to occur (and thus trading opportunities) in those sessions.
Are you suggesting that traders in their home country have a bullish bias for their own currency?
  • #8
  • Jul 12, 2018 3:25am Jul 12, 2018 3:25am
Hi profitkeeper

Quoting profitkeeper
Why are you looking at only bullish moves?
No reason in particular and yes this can be looked at for strength and weakness. I was just using the euro for the purpose of being able to demonstrate a long side strategy.

Quoting profitkeeper
I have always tried to trade the pairs that are more likely to move (up or down) in the session where that countries traders are more likely to trade, e.g. Japan, Australia and New Zealand in the Asian session, however I have no statistical evidence that this is correct - only the fact that news affecting those countries is more likely to occur (and thus trading opportunities) in those sessions.
This is very easy to test and quantify. It actually surprises me how many people trade off market truisms, which are unfounded and not supported by stats.

Quoting profitkeeper
Are you suggesting that traders in their home country have a bullish bias for their own currency?
There must be some fundamental reason and I am sure I have read something in the past about traders liking to favour there own countries currency however, since most markets are highly dominated by algorithms maybe this anomaly is starting to fade.
  • #9
  • Jul 12, 2018 4:47am Jul 12, 2018 4:47am
https://papers.ssrn.com/sol3/papers....act_id=2099321
Nec spe nec metu
  • #10
  • Jul 12, 2018 7:11am Jul 12, 2018 7:11am
Over the years i made the observation that the europ. direction will get very often unwound (to a big degree) in the first half of the US session.

Japan. and europ. session usually have much clearer biases.
  • #11
  • Jul 13, 2018 5:46am Jul 13, 2018 5:46am
to both of the above.

London starts, on average US reverses then either breaks again or full reversal. Asian ranges using existing price range formed between Lon & US. It's also an explanation as to why a lot of hedgers have success; not because paying double spreads is a sensible thing to do, but extending the time horizon of your trade for a reversal if it doesn't go your way, has absolute, measurable benefits.

As the paper says, "FX dealers can make significant trading profits without any informational advantage.. by intermediating between trading sessions".
  • #12
  • Jan 7, 2022 8:00am Jan 7, 2022 8:00am
Attaching the following papers so that they stay with the thread.

Currency Returns in Different Time Zones by Zhengyang Jiang

Intraday Patterns in FX Returns and Order Flow by Francis Breedon & Angelo Ranaldo
Attached File(s)
File Type: pdf SSRN-id2099321.pdf   603 KB | 425 downloads
File Type: pdf SSRN-id2613592.pdf   504 KB | 496 downloads
  • #13
  • Jan 7, 2022 8:39am Jan 7, 2022 8:39am
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  • #14
  • Jan 7, 2022 10:28am Jan 7, 2022 10:28am
Better System Trader held an interview "Getting serious about part-time trading" – Kris Longmore during which Kris talked about an edge he trades based on the above.

Here is a link directly to that part of the interview.

Inserted Video

I find it really interesting the way he discusses trading edges with low-performance metrics and that most money would stay away from.
  • #15
  • Jan 8, 2022 1:00am Jan 8, 2022 1:00am
Interesting topic. Would you suggest using this as a first layer filter to determine bullish / bearish trades?
And have you developed a way to identify such edges algorithmically?
  • #16
  • Edited 4:58pm Jan 8, 2022 4:31pm | Edited 4:58pm
Quoting carddard
Interesting topic. Would you suggest using this as a first layer filter to determine bullish / bearish trades? And have you developed a way to identify such edges algorithmically?
Whilst a system like this might be tradeable on its provided you can keep the costs down, that's not something that I would personally go for.

Moreover, the best way in IMHO to trade is as part of an ensemble. The following might explain it better:

+ve Edge 1
+ve Edge 2
+ve Edge 3

-ve Edge 1
-ve Edge 2
-ve Edge 3

An entry condition could be if 2 of your 3 +ve edges are true then get long and if 2 of your 3 -ve edges are true and you are in a trade then exit.
  • #17
  • Jan 8, 2022 4:35pm Jan 8, 2022 4:35pm
Some interesting GBP strength when looking at trades with the following conditions:

DayOfMonth(date[0]) > 10, DayOfMonth(date[0]) <= 20, Month(date[0]) = 1
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  • #18
  • Jan 8, 2022 5:14pm Jan 8, 2022 5:14pm
Quoting redbaron1981
Some interesting GBP strength when looking at trades with the following conditions: DayOfMonth(date[0]) > 10, DayOfMonth(date[0]) <= 20, Month(date[0]) = 1 {image}
Taking this a step further a simple strategy of buying GBPNZD on the first trading day > 10th January and exiting on the last trading day of January has yielded nice results.
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  • #19
  • Jan 18, 2023 3:37am Jan 18, 2023 3:37am
Quoting redbaron1981
{quote} Taking this a step further a simple strategy of buying GBPNZD on the first trading day > 10th January and exiting on the last trading day of January has yielded nice results. {image}{image}
Last year trade with this strategy generated about 367 pips (ex slippage & comms).

So far this year, the trade is slightly underwater, having an entry of around 1.90872 so it will be interesting to see if it picks up towards the end of the month. This dip could also be taken advantage of by giving you a better entry price.
  • #20
  • Last Post: Jan 19, 2023 5:59am Jan 19, 2023 5:59am
Quoting redbaron1981
{quote} Last year trade with this strategy generated about 367 pips (ex slippage & comms). So far this year, the trade is slightly underwater, having an entry of around 1.90872 so it will be interesting to see if it picks up towards the end of the month. This dip could also be taken advantage of by giving you a better entry price.
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