Premise of the 3am GBP Candle Trade

Trade Background
Let me start out by giving credit where credit is due. I learned this basic trade from the folks at Market Traders Institute (MTI) http://www.markettraders.com/. I'm not necessarily endorsing them, but I don't have the basic bad feelings expressed in this overall forex rating website either http://www.forexpeacearmy.com/public/review/www.markettraders.com. There's an underlying shittiness in their approach to selling you their Ultimate Traders Package (UTP). They don't post a price on their website. They offer a price when you contact them simply counting on whichever combination of customer negotiative skills and salesman's chutzpah yields them the highest price. I was one of the dumber people paying $5,000, but others paid far less. Overall I was satisfied with their package, but not $5,000 worth.

For this amount, you get the DVD collection of their UTP trading approach, a yearly subscription to their on-line seminars (multiple trading reviews per day and weekly mentorship seminars), their charting package (licensed from Fibonacci Traders), and an in-class 2 day trading seminar.


There are cheaper ways to understand forex trading. Peter Bain's Forex Mentoring program is great, http://forexmentor.com/. It's relatively inexpensive. My only criticism is that they are always trying to sell you a class or seminar. It gets a bit tiring after a while. Like I said, while there are several cheap or free charting packages, Fibonacci Traders offers a terrific package for not a lot of money, http://www.fibonaccitrader.com/


Success at this trade will still require you to understand support and resistance, candlestick reading, and MACD and RSI. I'm not good enough to explain these in great detail, but know enough when to get out of a trade.



Basic MTI 3am GBP Candle Trade
Statistically speaking, on average, after 3am (EST) the GBPUSD will move at least 110 pips on any given day. MTI teaches putting a straddle trade on the opening candle for the GBPUSD (3am to 4am EST); 15 pips on the top of the wick for the buy; 10 pips on the bottom of the wick for the sell. Once either is tripped, you must cancel the other. The stop loss on the buy is the price of the sell, and the stop loss on the sell is the price of the buy. The target limit on either side is 110 pips including the length of the 3am candle wicks and all. Simple and nearly fool proof.


Problems with this trade.

1. Over the long haul, this trade makes money, no doubt. My problem is the variability of return. Some months you will make an unbelievable number of pips. Other months you will lose a healthy number pips. My heart and nerve is not designed for that kind of variability.



2. Lately, there have been many many so-called long candles (50 pips or more), which puts your stop losses at an unhealthy 60 to 75 pips or more away. Clinging to the MTI method puts you at risk for losing a lot of money on any given day.



3. You can only make money in this trade if you trip the sell and it gets to its limit, or trip the buy and have it get to its limit. If you trip in either direction and it reverses, you are shit out of luck (SOL).

3am Grid Trades

I went back and looked at every 3am trade since 2005. I discovered that combinations of certain days and candle sizes have a high probability of hitting the limit. Moreover, the pips won over lost is at least 20%, most times more. Interestingly, I also discovered combinations of days and candle sizes that had a low probability of hitting their limit, which means if properly traded you can make money on the reverse.

In essence, I built a 3am Grid. Every combination of candle size and day of the week organized in a grid format. The Grid tells me whether there is a trade possibility and the probability of success. I have since put it in an Excel spreadsheet, which mechanizes the process and prevents false reads.

Over the next year or so I will post the current Grid trade, the probability of success, the pips won or lost, and an analysis of the success or failure of the given trade.

Stayed tuned!