Larry Williams developed the idea of Smash Days. It’s a day which smashes through yesterday’s range and reverses a whole bullish or bearish series of recent days. The set-up is simple and objective, the trade is easy to understand.
The objective is to join a reaction move away from a new swing high or low.
The strategy has been optimised over the years and the rules I will follow are -
Today’s Close must be above yesterday’s Close
Today’s Close must be above preceding 5 days’ Highs
Set a sell order at today’s Low, valid for tomorrow only
Set a stop-loss at today’s High
Exit at the first profitable Close after 5 sessions or more
As of last night there are two viable Smash Day trades available for Monday from the 28 leading forex pairs - short GBP/NZD or long NZD/CHF. You will see immediately that these two charts are inverse versions of each other so not much to gain by trading both. My preference is to go for GBP/NZD, as GBP is a more heavily traded currency than CHF and this pair has a higher historic volatility. If the sell order at yesterday’s Low is triggered on Monday, I will look to exit at the first profitable Close from Friday 04/04 onwards. If the sell order is not triggered on Monday I will cancel it.
Do smash days work in forex? I programmed smash days exactly as Larry Williams traded them, the normal kind that you describe and also the hidden smash days which are continuation/breakout signals. They work on indices, but I couldn’t find a forex pair that they work on. Your rules are slightly different though, so maybe that helps.
Interesting - I’ve seen this done, once, with the trades “divided into two”, the first half of the position closing at the first profitable close after “x” days and the second half closing at the first profitable close after “y” days.
It’s very possible that Smash Days on low volatility pairs wil be stopped out too frequently to be worth the risk. Indices are highly volatile and are not mean-reverting like forex is.
When to exit is always the hardest decision. It’s possible to have a very high win rate if you close a Smash Day trade at the first profitable Close. This of course means a large imbalance between the loss in pips for a stop-loss versus the gain in pips for a win. Very often immediate profit-seeking like this throttles a trade before price has really moved. I didn’t really want these trades open for weeks and weeks so 5 days seems a decent compromise.
Mondays Close -
GBP/NZD short was not triggered today so this is cancelled.
Plenty of Smash Day set-ups printed today - almost all the AUD and NZD pairs, plus USD/CAD. Can’t take all the trades, and as AUD and NZD mostly follow each other, a trade on both would double the risk on what would basically be the same TA.
My preference here is for a slightly more varied programme for tomorrow - a buy order on AUD/USD, a sell on GBP/AUD, and a sell on USD/CAD. All valid for Tuesday only.
Tuesday’s Close -
GBP/AUD short triggered. This position will run until it is either stopped out at today’s High or it makes a profitable Close on 08/04 or later.
The other two orders were not triggered today so they are cancelled.
No new Smash Day set-ups today. No less than 10 of hte 28 leading pairs printed Inside Days, so obviously, not a fertile day for our set-up.
Wednesday’s Close -
GBP/AUD short stopped out. I guess that’s what happens when you take a position across major news events…
Trump seems to have thrown a spanner in everyone’s plans. Right now I see only two Smash Day set-ups, EUR/JPY and USD/JPY, so I’m setting a buy order on USD/JPY.
For people with less experience who might be tracking this thread, it’s worth being aware of how your forex chart provider deals with the time period between the end of the US business day and the start of the next calendar date’s trading.
I am in the UK and use charts produced here. Most of our D1 charts close at 2200hrs UK time. So today’s daily Close price will be the price at 2200hrs.
It’s worth watching what your chart provider does in this period. You might find that daily Close prices change from what they look like at bed-time tonight to a different price when you get up tomorrow.
No less than 19 out of 28 charts show valid Smash Day set-ups from Friday’s trading. But two things are keeping me flat - one is the massive daily ranges, making stop-loss distances problematic - the other is that President Trump could do something unexpected before I’ve even had my lunch which inverts every forex and index situation globally.
Hoping this strategy will be available again next week.
It’s possible that forex volatility is going to decrease significantly in the next few days and we will see the welcome sight of some more forex Smash Day set-ups.
I still intend to ignore any such signals which print at the close today (Thursday) and tomorrow. I would rather be flat across the weekend - when Presidents are working and having meetings and making decisions at the weekend, times are not normal.
How volatile has forex been? I only catch EURUSD out the corner of my eye and it seems slightly worse than normal, but not crazy like the stock markets.
I imagine some people have lost huge amounts. It’s definitely hard to get a read on what price is doing, but hopping on the mega trends has been very rewarding when I’ve got it right
Forex is never as volatile as the major stock market indices so for many traders it is always worth the risk. Most of the time, the losers who are caught long by a bearish move were just not paying attention in the first place. Is that harsh? Maybe. But look back to EUR/CHF in 2015.
All my dollar long positions went to crap really quick!
And lucky for me I tried to revenge trade my way back to profits by opening more positions in the same direction, thinking that it can’t keep going that way. Well it kept going that way.
Finally starting to see some movement the other way today, and then bam, back to continuing in the wrong direction!
It all maybe boils down to whether you believe in adding to winners or adding to losers?
I think it’s yet another of those “two groups” things, isn’t it? The tiny group called “people trading for a living” will always tell us to cut losses short and add to winners, while the huge group of “traders” and “marketers” tell us to do “dollar cost averaging” and “average in” because even they’re uncomfortable using the words “adding to losers” (though many of them do know, really, that that’s what they’re doing)?
Smash Day set-ups thin on the ground this week so far, and none seem to have triggered.
This morning I have a buy order set at the high of USD/JPY, which printed a set-up yesterday, 16/04. This would be a very counter-trend position if the order triggers today so there are some optional responses available -
smaller position size
tighter stop-loss
shorter waiting time for the exit at profitable close, say 3 days instead of 5
Yesterday’s session has generated 6 Smash Day set-ups, all featuring NZD weakness - I personally avoid Australasian pairs due to high spreads (except for their one major, AUD/USD). Some would be with-trend entries. NZD pairs are mostly low historic volatility but NZD/JPY and NZD/USD are very high.
EUR/NZD, long, with-trend
GBP/NZD, long
NZD/CAD, short
NZD/CHF, short, with-trend
NZD/JPY, short, with-trend, volatility high
NZD/USD, short, counter-trend, volatility high
