Monday morning: the week's first range

[Fairman]

Monday morning: the week's first range

Monday behaves differently from the rest of the week. Weekend news has to be digested, positions rebuilt, and liquidity returns gradually.

The Asian session on Monday often has a gap and a tentative range. Early London tends to set the direction for the first part of the week. By New York, the picture is more settled.

A pattern some traders note: Monday's range is smaller on average than midweek ranges, but Monday sets reference levels, a high and a low, that get tested later in the week.

Spreads are wider at the Sunday open and normalize by London. Volatility ramps up slowly.

For scalpers, a gentler start to the week can be an advantage. The first few hours offer time to observe and mark levels without much pressure.

Testing day-of-week effects on the strategy is easy. Group results by weekday and compare. Some strategies work better midweek, others on Monday. Samples must be large, since each weekday has only 50 or so observations per year.

Whether the effect is real or noise takes years of data to determine.

By weekday, how does performance differ, and is the gap stable across years?

[Fairman]

Monday morning sets the week's first range, from the Sydney open through Asia into London. Liquidity is thin early on, and any weekend news can produce a gap. Many traders wait for London to open on Monday before trading, letting the first range form. Waiting costs little and avoids the thin early hours, when spreads are wide and weekend gaps are still being absorbed. It also gives time to read any weekend news that might affect the week's direction. Monday rarely rewards hurry. Patience helps.

[Amanhasnoname]

I split about 18 months of my own trades by weekday and Monday was the one surprise. My win rate was not very different, but the average loss was 20 percent smaller, mostly because I was more cautious and used smaller size. Tuesday and Wednesday made most of the money, while Friday afternoon was my worst stretch. With only around 75 Mondays in the sample, I do not trust the difference as proof of anything, but it matched how the days felt.

What I actually do each Monday is mark the Sunday open price and the high and low of the Asian session before London, then wait for the first half hour of London before taking a trade. I also write down the gap size, because gaps of 15 pips or more on EURUSD have usually been filled in part within the first London hour in my records.

If the week begins with big weekend news, I simply skip the first morning. The levels I marked often matter again on Wednesday and Thursday anyway.