The Weekend Dip strategy that had seen gains that were better than just maintaining a buy and hold position for much of 2011 is detailed below. The reason this pattern might exist is because bitcoin exchanges are open 24/7 but bank transfers are only occurring on business days. Add in the timezone difference between the U.S. and Japan (where Mt. Gox) and you get an even narrower window where new funds arrive at Mt. Gox.
When Bitcionica arrived, leverage made this weekend dip less likely to repeat as traders had the ability to move without waiting for cash transfers to clear. Even so, there seems a pattern recurs. Here's one way to try to trade it:
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From a long position, evaluate late Wednesday evening (U.S.) Thursday (morning Europe, afternoon east). If the 7-day high is below the previous 7-day high, then sell some. If that 7-day high is above the previous, then this is not a good weekend to try to play the weekend dip strategy.
So if you sold, then wait and watch. Put in some buy orders -- e.g., buy a quarter of what was sold at 5% below the , another quarter at 10% below, another quarter at 20% and the last quarter at 33% below.
Wait and watch.
Around Saturday evening is generally the low point. Watch closely after that. If the price just sits, you can wait longer, into Monday, but if the bids start changing the direction close back towards where you sold then cancel your bids and repurchase what you sold so that you aren't caught chasing the ball above where you sold.
If a big drop happened on Friday then bank wires from the West would reach Mt. Gox by Sunday evening (U.S) so try to be back in your position fully by then. If Friday was flat, then bank wires from the West won't reach Mt. Gox until Monday evening (U.S.) so you can be more patient, as there could be a drop on Sunday night/Monday as well. When there is a big drop, you want to be back in your position before those wires hit.
Now if instead the price rises from where you sold, check your emotions. If there is no reasonable explanation for it to jump 10%, for example, it might just drop over the weekend. Or it might continue zooming up 33%. It may be weeks before you re-enter your position anywhere near where you sold, or you may not end up with a chance to enter at the level you sold at. But when trading the weekend dip, your gains over time will more than compensate for the hit taken when the rare occurrance that price had a big run when conditions were ripe for a dip (using the 7-day high test explained above).
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p.s., I'm not a financial advisor nor necessarily an active trader either. You don't want to blindly follow a strategy like this -- I'm just explaining a strategy that seemed to work at certain points in history.
That said, this strategy kicks off only by selling a long position -- so if you will beat yourself up for missing that 40% rise that happened over the weekend, don't follow this strategy.
Seems like this strategy would be correct for about 90% of that chart.
Which means that it should drop again this weekend.
