Weekly trading system for currency futures

By | May 29, 2017

Weekly trading system for currency futures is a very simple price action based trading system. It is relatively simple, but requires patience on behalf of the trader to trade this method with success.

The weekly trading system, as the name suggests is ideal for use on the currency futures market. Because there are no complex trading indicators used, it is simple in implementation. The trading rules that govern the weekly trading system is also straight forward.

Using the weekly trading system, futures traders can spot decent trading opportunities. The weekly trading system comes with a big advantage. Chances are that you might have guessed it already.

You only need to analyze the markets once a week and you can prepare your watch list for the week ahead. By combining some fundamental analysis, you can easily filter the currency futures contracts as well.

So, if you have come this far into this article about the weekly trading system for currency futures, let’s dive in!

The Weekly Trading System – Understanding the strategy

The weekly trading strategy works on the price action for the week. We use the 4-hour time frame to analyze the charts. On most futures charting platform you can find that the 4-hour session reflects the price action for a week.

Take a look at the first image below to see a 4-hour candlestick chart with the weekly divider.

Currency Futures Chart with H4 Time frame showing weekly price action

Currency Futures Chart with H4 Time frame showing weekly price action

In the above chart, the time frame is for 4-hours. The white vertical lines divide the chart on a weekly basis. This shows the weekly price action, where each session (candlestick) is for 4-hours.

Weekly trading system – Plotting last week’s high and low

Now that we have the base template ready let’s move on to the next step. This next step is important in understanding how the weekly trading system works.

Go back to the previous week and mark the high and low prices with a horizontal tool.

The next chart below shows the previous week’s high and low price levels plotted with the horizontal tool.

Weekly Trading system – Step 2: Plot last week’s high and low

Weekly Trading system – Step 2: Plot last week’s high and low

Once we have the levels ready, the next step is to make use of the Fibonacci time tool. Depending on the charting platform you use, this indicator might have different values. Delete the defaults and set the values of 0, 1 and 0.30

Plot the initial value at the current week’s opening session. Then drag the Fibonacci time zone tool all the way so that it covers 30 bars into the future. (Remember, that on a 4-hour chart, there are 30, 4-hour sessions).

This is further explained in more detail on the next chart.

Weekly trading system with the Fibonacci time zone tool

Weekly trading system with the Fibonacci time zone tool

In the above chart, what we did was simply plot the weekly session for the coming week. This is how it works/looks like when you are analyzing the chart on a Sunday. But you could also wait for a few sessions on Monday as the vertical dividers re-adjust.

The chart below is the same as above but with Monday sessions open on the chart.

Weekly High Low breakout trading system with adjusted Fibonacci time zones

Weekly High Low breakout trading system with adjusted Fibonacci time zones

Weekly trading system – trading rules

Now that we have last week’s high and low and the current week projected with the Fibonacci time zone tool, the next step is to define the trading rules.

Notice the 0.3 line on the Fibonacci time zone tool.

  • Go long when price breaks above previous week’s high on or before the 0.3 session
  • Go short when price breaks below the previous week’s low on or before the 0.3 session

Hold the position and close out either at the end of the week, or hold the trade for a few ticks.

When price does not breakout above or below the weekly high or low, no trade is initiated.

Note that the 0.3-time zone is about the first 4-hour session on Wednesday. Thus, we can also define the trading system as waiting for a price breakout from last week’s high or low on or before Wednesday’s first 4-hour session.

Weekly trading system – Trade Examples

The next charts below gives some examples of this trading system in action.

Example of a short trade set up.

Example of a short trade set up based on weekly high low trading system

Example of a short trade set up based on weekly high low trading system

In the above chart, we first plotted last week’s high and low levels. Then the Fibonacci time zone tool was used to identify the 0.3 session. A short position is taken after the 4-hour session closes below the last week’s low.

You can hold the short position to end of week, or book profits for a few ticks. Read about the currency futures contract details to learn more about the various tick size and contract size values.

Example of a long trade set up based on weekly high low trading system

Example of a long trade set up based on weekly high low trading system

The next chart above shows a long position that is taken. Notice how price breaks out much ahead of Wednesday’s session (0.30 of the Fibonacci time zone). The long position is taken here and held to take profits after a few ticks or held to close of the week.

Pros and cons of trading the weekly trading system

The weekly trading system is in fact a simple breakout method. Here, long or short positions are taken when price breaks out from the previous week’s high or low. We make use of the Fibonacci time zone indicator to ensure that the breakout happens early into the week (Wednesdays as you might have guessed).

Once the system signals a trade, the position can be held to book profits for a few ticks or closed by end of week.

In terms of setting the stop loss, just ensure that price does not close back above the previous week’s low or below the previous week’s high.

This trading strategy is customized to work the futures currency market and is relatively easy to trade as you have just seen.

The disadvantage of this trading system is however the fact that the futures trader needs to be patient and wait for the breakout to occur. Chances are that you might miss the initial breakout. This will result in the trader being forced to enter at a later level. It could turn bad if price decides to play choppy.

Still, with an average of 2 set ups per week, this trading system will keep you from over trading and it will also ensure that you make significant profits when the market moves in your favor.

Give the weekly trading system a try and let me know in the comments on this trade’s performance.

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