Are Mondays Bad? Or Is It The Weekend FEAR FACTOR?

We love to trade. When you finally figure out how to do it... there is an exhilaration to this career that can't be beat. Yes, we're happy for that weekend off ... forced downtime is always good. But we're actually happier when the market opens after the weekend...

and yet...

We also feel a certain trepidation and fear going into our first day back. Do you? The fear of losing always accompanies trading. When we've been trading awhile (like mid-week) we're strong in our psychology again and we overcome that feeling, or at least keep it in its place. But that first trade back after time off always makes us more nervous. So it's a double-edged sword that first day.

In this newsletter we have some more theories about this we'd like to share, and some suggestions for conquering the weekend slump.

Good trading to you all, Evelyn & Mindy

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Part A: Should I Trade Mondays?

Mondays get a bad rap in Forex. A lot of people just take the day off. But is it really the market that is slow? Or is it this weekend build up of fear, or the downtime when we lose our sharp edge that is really the culprit? Granted, some times there is not enough news on a Monday to move the market much, but let's take a look at some statistics. We often compile our own stats at Forex Smart Tools, because we always want to prove... or disprove... common notions (Question Everything!). We love to see behind the veil of myth. So we picked a few years to look closely at the ADR (Average Daily Range) by day of week.

Let's look at the ADR per day of week for the EURJPY for the years 2009 thru 2013.  In these charts each bar represents a day of the week, so you're seeing the bars for Monday | Tuesday | Wednesday | Thursday | Friday in each chart:

2009 2010 2011
2009 ADR by day of week 2010 ADR by day of week 2011 ADR by day of week
2012 2013 5 Year Averages
 2012 ADR by day of week  2013 ADR by day of week Summary ADR by day of week

What do you see? In 2009 and 2011, Monday is the second strongest day of the week, following Thursday. In 2010, all the days of the week vary by only about 40 pips. This gives you enough info right here to begin to question the 'myth' about don't trade Mondays, doesn't it?

Part B: How Do I Keep My Game On?

If you look at professional sports, watch how much time they spend warming up before the game starts. An athlete will never hit the field cold. Yes, part of that warm-up time is to get the muscles loosened up so they are less susceptible to injury, but an equal part to that routine is getting the mind in gear for what's about to come. We watch a lot of football and notice that the quarterback will often try to get the ball to his best receiver as early in the game as he can, so the receiver can begin to 'get a feel for the game' right away. This is far beyond 'warm up' - it's in the spirit of shaking off the fear factor. That's just what we're talking about in trading too. You have to shake that fear off as quickly as you can before you put your money on the line.

One of the best ways we've found is to hop on the Forex Tester for awhile on Sunday afternoon. It's an hour we always find well-spent. Even half an hour makes a difference to our confidence before we begin our trading week. When we spend this time, we're not so much testing our strategy or testing the market... we're refreshing our reactions and our mental state. One of our best trading buddies David puts it this way:

“I struggled with my trading, entries, exits, patience etc. The way I really conquered it was I use a trade simulator now. I pick my times to trade live, and spend the rest of the time on my trade simulator. I can forward-test trade a whole 24 session hour in about 60 - 90 minutes.

I trade the simulator, looking for trades. When I see one, I stop the simulator, evaluate the trade, the stop loss I need to use, the lot size I will place based on the Calculator, the exit I will look for – and then restart the simulator.

By doing this over and over again in fast speed, I more easily see the set ups that fail in live trading and the ones that win as well.

I have taken my live trade this morning...and now I am on my simulator until Frankfurt open...so it is like I am a finely tuned athlete when my time for live trading comes up.” ~ David G.

Give it a try and see what a difference it can make to your trading too. If you still feel the weekend slump, one other suggestion is to lower your risk profile until you feel your confidence returns. For example, instead of risking 2% per trade, you might choose to risk 1% on your first trade back each week. The position sizes for the correct number of lots to use for your reduced-risk trades are easy to see using the Calculator - just reset your risk profile for that day.