When I was growing up around the age of 8 or 9 I realized that I had a sleeping issue. While all my brothers were asleep I was watching re-runs of Cheers or Night Court, both of which were highly entertaining to me. As I grew older I would stay up watching movies, playing games or just about anything besides sleeping. When I started trading Forex in 2011 I realized that my sleep disorder was perfect for Forex trading as it is a 24 hour market. I would stay up trading the EUR/USD pair and watch a movie or some TV program. It was perfect, too perfect. While forex fit my sleeping patterns fairly well, I started staying up too late. On a typical night I would go to bed around 1:00 am, however, now that I was trading forex I would routinely stay up to 4:00 am. I was in trades, I had to manage the trades.
Last year I was in Boston and had the opportunity to take the Great Keith King out to Dinner. Keith is an expert forex trader and I wanted to pick his brain on what he was currently trading, looking at, and simply have a dollar conversation with one of the best. While discussing the forex markets, Keith asked what pairs I was trading and what style of trading. We discussed how I was trading the EUR/USD pair and Keith said “Matt, what is the probability the EUR/USD will continue moving in the same direction as the open?” The answer depends on the pair and economic reports later in the cycle but most probabilities put it in the 60-70% range. As I was explaining that, Keith simply stated “if that is true, then simply go to bed”. Hence the birth of the Go To Bed Trade or GTB.
The GTB trade is a simple trade and very similar to the Bank Open trade. As discussed in prior chapters of the Trading 101 series, there are 4 major bank opens in the currency cycle, New York, Sydney, Tokyo, and London. During the bank open is when most economic reports are being reported, it is when most HFTs get going, when the international trade is heating up, and when the professional traders are trading. All of this means that the bank open is the most important moment in the day for the currency.
The pair traders will focus on for the GTB trade will vary depending on the individuals specific situation and where they live. For Keith, the pair is the USD/JPY and for me it is typically the EUR/USD. At the opening of the bank specific to the pair you will trade the market will start moving. Typically we will want to see a break of support or resistance prior to making the trade. If there is no movement and no break, then just go to bed. If there is, you will want to place the trade and then determine your stop loss.
In the above example the London bank opens up at 8:00 am GMT which is the Greenwich Mean Time and the basis for the world 24 hour time clock. It is also the time frame in MetaTrader 4 which I use through FXCM. When the bank oepned up, the EUR moved up above Resistance against the USD. This is a breakout and a perfect signal for the GTB trade. A simple buy places the order, I placed a 20 pip stop and went to bed. I woke up this morning, grabbed some coffee and drove to the office. When I got everything logged in, I pulled up the trade at about 7:30 am MST which is still during the London bank time zone and adjusted the stop and finally at about an hour before the london bank shuts down, I close the trade.
Total time in the trade: 7.5 hours
Total Prep Time: 15 minutes
Total Management Time: 3 minutes
Total PIP gain: 65
You have to love Day Trading in the currency market.
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