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How I Trade the 6PM & 8PM Session (Fair Price Theory on Funded Accounts)
JJ Simon
Overview
This video explains a trading strategy focused on the 6 PM and 8 PM (Asian) market sessions, using the concept of 'fair price' as a key target. The presenter outlines how to identify continuation and reversal trades within these sessions, emphasizing the 6 PM open price as a primary indicator of fair value. The strategy involves looking for breaks of structure to enter trades that revert to or continue towards this fair price. The video provides numerous examples from a two-week trading period to illustrate the application of these principles, highlighting the importance of backtesting and understanding market dynamics, especially around news events.
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Chapters
- The core strategy revolves around using the 6 PM market open price as a 'fair price' target for trades.
- This approach can be applied to both continuation and reversal trades within specific trading sessions.
- The goal is to take up to four trades per day across the 6 PM and Asian sessions.
- Backtesting this strategy with fair price targets is recommended before live trading.
Understanding the concept of 'fair price' and how to use it as a trading target can provide a structured approach to identifying high-probability trade setups.
The 6 PM open price is identified as the initial 'fair price' for the trading day.
- For continuation trades in the 6 PM session, enter in the direction of the opening candle's momentum.
- Reversion trades aim to bring the price back to the 6 PM open price after a significant move away from it.
- Entries for reversion trades are typically triggered by a break of structure in the opposite direction of the recent move.
- The 6 PM open price is considered a fair price, and trades often target a return to this level.
This chapter provides specific rules for executing trades within the 6 PM session, focusing on two distinct trade types that leverage the 'fair price' concept.
Taking a short position after a break of structure, targeting the 6 PM open price, which is believed to be a fair price.
- The Asian session (opening at 8 PM) often trades back towards the 6 PM fair price, especially if it opens far from it.
- Asian session continuation trades are taken in the direction of the 6 PM price, entering on the first break of structure.
- Reversion trades in the Asian session target the Asian open price, entering after a break of structure.
- If the Asian session opens very close to the 6 PM fair price, continuation trades might be less favorable.
This section extends the fair price strategy to the Asian session, allowing for additional trading opportunities by applying similar logic.
Taking a continuation trade in the Asian session in the direction of the 6 PM price, entering off the first break of structure.
- Multiple examples demonstrate how continuation and reversion trades play out across different days and market conditions.
- The strategy involves waiting for breaks of structure to confirm entry points for trades.
- Gaps in pricing are significant; trades can aim to fill these gaps or revert to the 6 PM open price.
- News events, like tweets, can significantly impact fair price and should be monitored using tools like Forex Factory.
Reviewing numerous real-world examples helps solidify understanding and highlights the practical application and potential challenges of the strategy.
A trade where the Asian session opens far below the 6 PM price, leading to a continuation trade targeting the 6 PM open, resulting in 135 points.
- Sunday 6 PM opens are often considered more 'fair' due to the longer pricing period over the weekend.
- Large wicks and significant gaps can indicate potential reversals or opportunities to trade towards fair price.
- The strategy emphasizes patience, waiting for confirmed breaks of structure rather than forcing entries.
- Understanding when to avoid trades (e.g., when the Asian session opens very close to the 6 PM price) is as important as knowing when to enter.
This chapter introduces finer points and exceptions to the strategy, encouraging a more nuanced and adaptable approach to trading.
On Sunday, the 6 PM open is treated as particularly fair because it has 48 hours to price in, unlike the usual one hour.
Key takeaways
- The 6 PM market open price serves as a crucial 'fair price' indicator for trading the 6 PM and Asian sessions.
- A trading strategy can be built around identifying continuation and reversion trades targeting this fair price.
- Breaks of structure are primary entry signals for trades aiming to revert to or continue towards the fair price.
- The Asian session often exhibits behavior that can be traded by referencing the 6 PM fair price.
- Backtesting and observing numerous trade examples are essential for validating and refining the strategy.
- External factors like news events can significantly influence fair price and must be considered.
- Patience and waiting for confirmed structure breaks are key to successful execution.
Key terms
Fair Price6 PM OpenAsian SessionContinuation TradeReversal TradeBreak of StructureGap FillBacktesting
Test your understanding
- What is the primary indicator of 'fair price' in this trading strategy?
- How does the concept of 'break of structure' facilitate entry into continuation and reversion trades?
- Why is the 6 PM open price considered a significant level for trading the Asian session?
- What role do gaps play in the described trading strategy?
- How can a trader adapt their strategy when the Asian session opens very close to the 6 PM fair price?