The Thursday Effect

Can prices behave differently on certain days of the week? Yes. Why? It doesn't matter. More so,  you'll never find out. Given the size of the FX market, there simply isn't a single answer. However, that's not to say you can't leverage the pricing characteristics on a weekly basis.

Over the past few weeks, I've noticed that prices tend to be mean reverting in nature. Breakouts have a high probability of failing, even if the signals look great in the structural daily timeframe.

Although I've been making these observations, I haven't taken any screenshots. The screenshots below show the price behavior just this past Thursday.

EURGBP 4-Hour

EURNZD 1-Hour

EURCAD 1-Hour

Although I've only shown three charts, I've had a lot more breakouts fail if I enter the respective trades just before Thursday. The three charts on the Euro pairs all show intraday breakouts with breaches to their daily levels as well. Typically, these would result in very strong moves.

It's possible that these Euro pairs are correlated to some extent and there just happens to be reversals occurring around the same time. But I doubt it. 

Having observed this price characteristic on different pairs over the past few weeks has led me to believe there is a closing-out effect. As the week comes to an end, traders profit take or neutralize their positions to avoid the weekend carry. Logically, this should occur before EOD Fridays. It's possible that there's a broader risk-averse sentiment leading to earlier close-outs.

What is the takeaway here? Regardless of what the reason is, avoid trading breakouts on Thursdays because they just don't work.