Does the EURUSD Move Up or Down
at the Sydney Open?
(17:00 Eastern)
A Report Produced Using Quantum Charts

One of the most important, and in my opinion, most profitable things to understand about FOREX trading is that time matters. What you are about to read has some very convincing numbers to back this statement up. Mind you, this is only the tip of the iceberg and I am limiting the information in this report to 1 currency and 1 opening time frame.

The size of the FOREX market in general dwarfs all other markets. One of the unique aspects to the FOREX market is the effect of world trading. The FOREX industry is the only one in the world where there are 5 significant trading time zones. Unlike stock exchanges, the currency pairs traded across all world markets are the same. When the stock market opens up in Tokyo, the stocks are primarily Japanese stocks. However, when the FOREX opens, the same currency pairs that were trading in the US the previous day are the same ones being traded across the world at opening time in Tokyo.

Time matters.

This report is going to focus on only 1 currency pair and 1 opening session, the EURUSD and the Sydney, Australia open. Sydney is the first opening session in the world, the first to begin the day. The EURUSD is one of the most popular currency pairs, if not the most popular.

Market Movement Stats:

All information was obtained using Quantum Charts which has a unique feature that shows what is called market movement stats. MMS provides information on actual market movement after a setup. If you know the history of market direction, you know how to properly exit a trade. This information is extremely valuable information because it eliminates the need to come up with premature exit criteria.

(Stay Tuned for a complete tutorial of Market Movement Stats coming in the near future)

Does the EURUSD Move Up or Down at 17:00 Eastern (Sydney Open)

The stats above are from late 2001 to July of 2010. Bar 1 is the first 30-minute bar after the open and closes at 17:30. As you can see, the stats are dead even with the market closing higher 50% of the time and lower 50% of the time.

Bar 2 is the close relative to the opening price at 17:00 and closes at 18:00. Accordingly, the close at 18:00 has been lower 56% of the time and higher only 44% of the time.

At first glance, this may not seem very significant, but it is. If you were to flip a coin 1,774 times (provided no intervening bias to the flips), the probability of it landing heads or tails up 56% of the time basically at 0% (.0000000043% to be exact). Accordingly, with this many occurrences, there is definitely a bias to the downside within the first several hours of the open.

The question is to find out whether there is other information or conditions that tend to precede the 57% of the time the market moves down that will increase our probability even more. Accordingly, I begin to look at market action itself. We know that within 1 bar of the open, the market has moved up or down equally. But what if we look at the 2^nd bar if the 1^st bar closes higher? This means that we will be looking at the 866 occurrences where the market moved higher and seeing what happens after that.

At 17:30, if the close is greater than the close of the 17:00 bar, where does the EURUSD move?

The second bar shaded opens at 17:00 and closes at 17:29. We are looking for when that bar closes greater than the previous bar’s close, which you can see occurs here. Bar 1 in the stats below is the first bar after the shaded pattern. It opens at 17:30 and closes at 17:59. It is important to note that the Bar 1 stats are relative to the close at 17:29.

As you can see, within 1 hour (2-bars) of this pattern, the market has moved down 64% of the time. 64% is not bad, but we have reduced the number of total occurrences by half. We have also proven that these stats are not random. The probability of this occurring randomly is (.15 zeros …399% to be exact**).

**Note, these will be listed as 3.99%-15 from here on out. The -15 is the number of zeros after the decimal point that precede an actual number value. It looks like: .000000000000000399%

Since I believe time matters, my next step is to back out of the price pattern itself (the requirement for the close to be greater than the previous close), and look at the days of the week to see if there are any specific days that tend to see the market drop significantly more than others. I will start out with Monday 17:00 NY time, which is actually Tuesday morning in Sydney:

Monday:

Tuesday:

Wednesday:

Thursday:

Sunday:

Summary of Days of Week within first 2-hours:

Monday – Down 60% within 2-hours
Tuesday – Down 53% within 2-hours
Wednesday – Down 58% within 2-hours
Thursday – Down 62% within 1-hour
Sunday – Down 52% within 1-hour

The most bearish day is Thursday evening (Sydney Friday morning). However, this stat is actually closer to random than the other stats shown at 3.39%-06 probability of being random stats. Overall, the day of week in and of itself does not seem to provide any additional bias in short-term direction after the Sydney open.

The next step is to bring back the pattern and couple it with the day of the week. We will look at what happens each day when the opening bar close is greater than the previous close.

I will show you the screen shots for Monday and Thursday as they are the most bearish.

Monday:

Thursday:

Monday – 70% within first ½ hour (1-bar) Random Probability = 4.43%-07
Thursday – 72% within first ½ hour (1-bar) Random Probability = 1.40%-08

The other days were as follows:

Tuesday – 63% within 2-bars. RP = 3.86%-03
Wednesday – 63% within 2-bars. RP = 3.36%-03
Sunday – 54% within 2 bars. RP = 14.6%

Clearly, all stats are solid except for Sunday (Monday morning open in Sydney), which makes sense to be the odd day out because it is the only day of the week where the market opened after being closed for 2-days on a consistent basis. The stats generated come in at almost a 15% probability of being random. Because of the stark difference and very high probability of being random, I will now throw out the Sunday evening opening session for all remaining scenarios.

Here are all stats based on Monday – Thursday opening session if the first bar’s close is greater than the previous close:

RP = less than 1.70%-15

The next step is to increase the move higher on the initial opening bar. Previously, we were looking at the close being greater than the previous close. We will now require that the close is greater than the previous high instead:

As you can see, the stats are very solid showing 70% of the time the market moves down within 2 bars. The RP is at 1.75%-11

If I increase the time frame in which the close is greater than the previous high in either the first OR second bar of the opening, the following stats occur:



Here, the % moving lower dropped by 2%, but the number of total occurrences increased by 135. This caused the RP to decrease to 1.85%-13 while maintaining a very solid % stat. This trend continues if we expand the time before the price action condition occurs. If we allow the close above the previous high to occur within the first 4 bars of the market opening, total number of occurrences increases by over 200 to 621 with 66% of them closing down the following bar (see below). This brings the RP to 2.72%-16. It is interesting to note that these are getting very close to the stats shown when the opening bar’s close is greater than the previous close in general (page 3).


Accordingly, there are times when the opening bar closes higher and the market continues to move higher to the point of closing above the previous high.

Here, the light gray bar in the shade is the 17:00 bar. As you can see, it closed higher than the previous close. Even those the stats show that the market generally moves lower within a few bars, sometimes, it can continue to move higher. The last bar in the shade shows the pattern of the opening bar’s close being greater followed by a bar where the close is greater than the previous high within 2 bars of the opening bar. The MMS when this occurs are below:

What does this mean? It means that if you were to implement a strategy where you go short if the opening close is greater than the previous close, and the market doesn’t move in your direction, you have an opportunity to add to your short, or re-establish your short if you were stopped out or already took a target. 70% of the time the market has moved lower within 2 bars of this occurring. The RP on this potential re-entry is 4.82%-08.

Getting back to the original premise that the market has a solid probability of moving down after an up-move shortly after the open, I added a 14 period simple moving average filter to the mix. I simply required that the low of the bar that moved higher GREATER THAN the moving average. See example below:

The light gray bar is the 17:00 bar, which you can see has a close greater than the previous close. The market moved down 9 pips and then the dark gray bar shows a close greater than the previous high (within 4 bars of the opening bar). The blue line represents the 14 bar simple moving average. You will notice that the low of the dark gray bar is greater than the moving average. This is the filter used for the stats below.

Using this filter dropped the number of occurrences, but notably increased the probability of the market moving down. The RP with this pattern and filter is at 2.81%-13.

Creating the opposite filter produces some interesting confirmation stats. There is still a move down 60% of the time, but the RP drops to 5.83%-02.

I then changed the filter to only show occurrences when the 14 bar simple moving average had moved higher for 10 consecutive bars (the market had been moving up prior to the Sydney open). If a close above the previous high occurs within 4 bars of the open, the market has moved:

These are very solid stats showing 75% of the time the market moves down by an average of 13 pips within 2 bars. The RP on this is at 3.84%-11. If I require that the close above the previous high occur within 2 bars of the open, instead of 4 bars, the % the market moves down is:

The really interesting part about these stats is that when the market moves down, it tends to continue moving down for several hours. This increases your profit potential per trade with the average peak lower after 10 bars tops out at 26 pips. BTW, the RP on this is 1.79%-10.

NOTE – If the % stat is more favorable, the RP stat doesn’t have to increase as well. What we are looking for is the % stat to increase while the RP stat is maintained despite the change. This helps validate the % increase in the market movement stats.

Again, another very interesting confirmation to the short-term necessity for the market to have been moving higher…if we use a condition where the 14 bar simple MA has moved lower for 10 bars in a row, and REMOVE the requirement for a close greater than the previous high, the following stats occur:

All of a sudden, our bearish probabilities vanish and are actually slightly bullish after the Sydney open. Interestingly enough, if I add a condition for a close to be LOWER than the previous low (within 1 bar of the open) with this MA filter, there is a hint of a buying possibility:

These stats are nowhere near as solid as most of our bearish opportunities we have uncovered here. They are not bad at 69%, but with only 74 occurrences, the RP is at 1.22%-02. The opportunity looks to be short-lived and simply not as robust. However, what this does provide, if nothing else, is confirmation of the validity of all the bearish opportunities we have come across in this report. To do exactly the opposite and get the opposite results when the general consensus was down anyway (see page 2) adds credibility to what the numbers are showing.

SUMMARY –

No matter which way you slice it, if the EURUSD moves up shortly after the open of the Sydney market, there is a selling opportunity available. You will notice that there was no optimization going on. Of course, changing variable will change stats to some degree, but the general trend was down no matter what the variable, as long as the principle was in place.

Only Quantum Charts gives you the ability to quickly and easily research trading opportunities without having to program a single word of code. If you have not obtained your copy of Quantum Charts, visit our website and order today. You’ll be uncovering profitable trading opportunities like this in your very first hour.