Talking Points:
• Meaningful event risk and technical developments do occur in the final hours of the trading week
• The lull in liquidity can disrupt good trades, but certain technical and fundamental factors can shore setups
• Our general approach to the market also matters a lot as to whether we participate in week ending trades or not
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Most traders will face this dilemma at some point in their career: whether or not to take an attractive setup as the final liquidity of the trading week evaporates? The answer to that question depends on the circumstances of the market as well as the particulars of our trading approach. If the fundamental or technical spark that is encouraging the twilight move would be questionable for drive during the middle of the week, it is unlikely to last through the weekend. A major development, on the other hand, may carry the heft to punch the accelerator for some time. The prominence of the technical balance is also important. A counter trend move is more difficult to fuel than one of continuation. Further, a break of a multi-week boundary in line with trend is far less convincing than a move to multi-year or record extremes that follow the current. We show this contrast between the USDollar and Nikkei 225. The other general consideration is our trading approach. Those that usually hold traders for less than a day and for objectives that are less than an average day's range would be inviting tremendous risk by holding over the weekend. Alternatively, for a trader with a multi-month holding period with wide stops and targets, the brief drain is similar to a daily session lull. We discuss trading heading into the weekend in today's Strategy Video.
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