Sometimes a trader can create problems by thinking too much. Which is why I prefer to just let the indicators clear the path for me, thereby resolving my tendency to over analyze a chart.Simple is often better (I think Forrest Gump said that) and the overnight and opening session with EUR shown above illustrates my point.
One technique I frequently employ is to run a linear regression (LR) channel from the Dipper entry (3:00 am) to the US market open (8:30). This overlay helps put the European session in perspective for my feeble old brain while at the same time providing some clear thresholds for momentum breakout or breakdown. As with the straddle that I have posted several times, this LR channel serves the same purpose as our horizontal channel defining the straddle. The fact that this channel is sloping may appear problematic but the trick is, just like the straddle to set our entries 15 pips above and below the channel.
What this means from a operational standpoint is that those entries have to be adjusted every five minutes, as the slope of the channel will change our thresholds on a tick by tick basis. That’s a bunch of work unless you have click and drop entry capability on our platform. A much simpler solution is simply to add 2 trend lines, one 15 pips above and one 15 pips below the channel bands and to use the visual cross of those trend lines as your entry. Using this approach can significantly reduce the number of false entry signals, especially at the US market open. This same template watching the EUR can be used to trigger an FXE order and helps mitigate the risk of getting caught in a US market open gap reversal.
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