Fade or follow: the answer depends on the clock

[Shadow Trader]

Scalpers often pick a style and stay with it. Either they fade moves, betting on small reversals, or they follow momentum, betting on continuation. Market behaviour, however, changes through the day, and a fixed style pays for that.

Roughly speaking, the Asian session favours range behaviour on most pairs. Price drifts between visible levels, and fading the edges tends to work better than chasing breakouts. The London open often brings directional bursts, where early fades get run over. The New York overlap can go either way, depending on data and flows. The late New York session tends to fade again as participants leave.

None of this is a rule. It is a starting hypothesis that can be tested. Split the journal by session and by trade type, fade versus follow, and compare expectancy in each cell.

A table with four sessions and two styles produces eight numbers. Most traders find that one or two cells carry the profit while others quietly drain it.

The fix is not complicated. Trade the style that works in each window, and stay out of the cells that do not.

A refinement is to test the hypothesis on each pair separately, since the session personality differs by pair. A pair dominated by Asian participants, such as USDJPY, may behave unlike a European pair at the same hour. The cells in the table then become pair by session by style, and while the sample size per cell shrinks, the patterns that survive are far more specific.

Which combination of session and style has given you the best results, and which one should probably be dropped?