DIBS Don’t Do Bank Holidays

The Daily Inside Bar Set Up is not one to be trading on forex pairs when there are bank holidays in the major money centers of the world. This past Monday May 30th was a bank holiday in the USA and the UK, which meant that major sources of liquidity in the forex markets (i.e. London and New York) were closed for business. Although the markets were “technically” open with some activity contributed from Asian and continental European market participants, the charts below show that EURUSD and GBPUSD were relatively quiet with daily ranges that were less than 100-pips.

EURUSD shows that of the inside bars on the 1H chart that printed during European and US business hours, there was no follow through on any of the breakouts as the market environment was more of a range-fader’s paradise. The GBPUSD chart shows that a 10-pip DIBS signal bar might have gotten lucky for a 1:1 take-profit.

Does this mean that the DIBS is not a good trading method? Not at all, but it’s important to remember that the DIBS trading method is very dependent on trading during periods of good market liquidity. The method is essentially a breakout-strategy (i.e. break of a relatively narrow hourly range or 30m range), and therefore in order for the breakout to have the best chances of success you want to see many market participants jump on board the potential move in order to crank out some good pips. Well in order for that to happen, it would help if you didn’t have over half of the market participants out of the office on holiday. This explains why it usually is a good idea to stay away from trading forex on bank holidays that affect the major money centers.

Image003

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: