Forex Strategy: Profiting From the Friday Breakout Phenomenon


In 1983, by the time he was thirty-seven years old, Richard Dennis had made hundreds of millions of dollars out of an initial sum of just a few hundred dollars trading the markets. Dennis setup the hugely successful Turtle Trading program with William Eckhardt 1983 – 1984 and is credited with inspiring some of the worlds most successful traders alive today including Paul Tudor Jones of Tudor Investment Corporation and Jerry Parker of Chesapeake Capital Corporation.

Jack Schwager interviewed Dennis back in the late eighties for his national bestselling book ‘Market Wizards’. One part of the interview which stands out is Dennis’s comments on Friday breakouts:

Dennis: ‘One Friday, the grain markets all closed at their highs for the year. I believed – and I still believe –  that you go with the trend, and the stronger the trend, the better. I remember getting in on the close and just buying a couple of mini contracts in corn, wheat, and beans. The next Monday they all opened up the limit because of the corn blight news.’

Schwager: ‘Is this particular pattern – a very strong close on a Friday – a market characteristic that you find useful as an indicator of the following week’s price action?’

Dennis: ‘Yes, at a minimum, it is important not to have a short position with a loss on Friday if the market closes at a high, or a long position if it closes at a low.’

Friday Breakouts in the Forex Markets

Of all Forex breakout patterns, Friday breakouts taken in the direction of the established trend are one of the most robust. Rules for this strategy were released to the public over 20 years ago by system developer Joe Krutsinger and have continued to perform well to this day.* Joe Krutsinger named the system ‘One Night Stand’.

Rules for the system are as follows:

  • Buy only on Fridays— at one pip above the highest high of the last ten days— if the 10 day simple moving average is above the 40 day simple moving average.
  • Sell only on Fridays— at one pip below the lowest low of the last ten days— if the 10 day simple moving average is below the 40 day simple moving average.
  • If you get filled on either rule, exit on Monday morning’s open, or Tuesday morning’s open, if Monday is a holiday.

Money management stops can be applied to the system so as to contain risk. It is important to remember that the closer your stop, the more likely it is that you will be stopped out.  Stops can be optimized based on a recent measure of volatility using an indicator such as the ATR (Average True Range).

Why has this system continued to perform well over the years?

Most Forex traders feel uncomfortable holding risk over the weekend. Traders who hold positions backed by an underlying strong trend over the weekend period pick up a risk premium for doing so.

For more information on how to trade with a quantified statistical edge in the Forex markets get started on our trading signals program today, enroll now in a risk free trial…

* Past performance is no guarantee of future returns.

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