Expert Advisor and Forex Trading Strategies

Chapter 1: The Day Of The Week Anomaly

Research has shown that stocks and other markets tend to move more on Fridays than Mondays.

Forex was the main market for our test. To begin we had the issue with Daylight Savings Time which required that we offset the time settings.

In sample refers to the data that you have and out of sample to the data you don't have but want to forecast or estimate.

The Signal

Forex was the main market for our test.

and you then begin the testing process. As a trader it's important to know how the simulated results are calculated and you will also need them be as precise as possible.

Now what if you ask yourself, "do they work?"

As an investor or trader you will at some point come across online posts which state "best break out strategy." You will also find research articles and books explaining the average returns of various strategies and providing statistics on them.

Time was also not a significant factor because the real volatility triggers are when the market is open. Therefore, if we did not close Friday evening but held the positions open until Monday it would have not had a noticeable impact because the market does not move when it is closed.

Data

Then we needed to select which time of the day would be optimal for the trade, should we use the European, New York or the Asian session close. To keep things relatively simple we just bought on the open of the day Friday (European), and held the positions to the open of the next day.

The Day of The Week Effect for Friday, we bought at 00.00 and sold 00.00 on Monday.

This required that we had to take into account the gap (weekend), but we did not consider it a big issue.

Then we needed to select which time of the day would be optimal for the trade, should we use the European, New York or the Asian session close. To keep things relatively simple we just bought on the open of the day Friday (European), and held the positions to the open of the next day.