In this article, I want to systematically investigate the tendency for different Forex pairs and CFDs to perform better on certain days of the week and month. I will do so by backtesting a simple strategy whereby we buy on the open of a particular day and exit on the close of the same day. We will then sum our performances over the years in question.

We will break our study into 2:

  • choosing days of the week (Monday through Friday) to see if each of our chosen instruments have preferences for one over tha other; and,
  • choosing days of the month for the same reason as stated above.

Some questions on our minds as we explore are:

  • Do all forex pairs have best trading days of the week and month?
  • Are these best trading days the same across all pairs or are they different?
  • can we say the same for CFDs?

Best Day of the week

Below are different bar charts that represent the cumulative returns if we bought each pair on the open and exited on the close of the same day.

The size of the bars can tell us so much about how the strategy has performed. The longer the bar, the more profitable the strategy is for the day of the week being considered. The days with the most positive bars are best for longs; this doesn't mean that there were no shorts that would have worked out on those days. Conversely, The days with the most negative bars are best for shorts.

What we can see in the chart above is the fact that Thursdays tend to favor long positions for the EURUSD. So if you took your time to buy on the open of the market on Thursdays and exit the longs at the close of the day, you would be in profit cummulatively at the end of the period being considered.

Fridays are best for shorts. The other days are more of mixed-bags and I would prefer to check other currency pairs or CFDs I am watching to see if they have better days to help me fill up the missing days on this pair.

From what we can see above, if I were to trade this strategy, GBPCHF is best for shorts on Thursdays and Fridays. The Longs are not worth the trouble in my opinion. I will seek out other instruments for those days that are lacking in good trading days.

For the NAS100, it seems from the chart above that long-only strategies would be the best in handling it. Buying on Mondays and letting it ride through Thursday might be one of the best ways to trade this. However I wouldn't commit funds to any of these strategies yet, as we nned to fully backtest this in-sample and out-sample and bring our some key figures like percentage wins vs loses, Sharpe ratio etc.

Best Day of the Month

What about the possibility of a best trading day of the Month? Larry Williams used the same ideas to trade in the commodities market. As we go through the charts generated below, it would be best to have the same mindset that led us through all the charts for the best day of the week studies above.

From the chart of the GBPJPY above, we can say that the overall best day for longs is the 31st of any month and the best day for shorts are 4th.

We will list the rest of the instruments considered in the appropraite appendix below for you to check and draw your conclusions.

Conclusion

We have come to the end of our study. This writeup is strictly for educational puposes only. Past performance is not an indication of future performances. Please do conduct your own research and come to your own personal conclusions before committing funds to any trading strategy.

May the pips be with you!

Appendix 1: Best day of the week to trade on a list of selected FOREX pairs and CFDs

Below are bar charts of the study carried out above on more instruments for your perusal.

Appendix 2: Best day of the month to trade on a list of selected FOREX pairs and CFDs

Below are bar charts of the study carried out above on more instruments for your perusal.