The Perfect Timing for Trading Forex
Yes, it is true that forex trading market is available for trading 24 hours a day, but this does not mean that we should trade for all 24 hours unless you are a robot. Forex trading market is available for 24 hours a day by continuously following the all three major financial time, zones, which includes Asia, Europe and America. Forex trading market also overlaps every day between 2 major time zones and the timings of two sessions overlapping are as following.
• New York and London between 12pm GMT to 5pm GMT
• London and Asia between 8am to 9am GMT
For every forex trader, it is necessary to understand as how to make the best use of trading time and trading activity available in forex trading market. Although we can trade forex for 24 hours a day, but it is important to understand that the forex trading activity is not the same for all 24 hours a day.
Every currency pair is benefited as according to their respective time zones, for example; the trading activity (price action, liquidity & volatility) in EUR/USD currency pair will be at its peak, at the time of New York and London Session overlapping as compared with any single session of New York or London, and the trading activity for the same will be the lowest in Asian session.
Best Hours for Trading Forex
True Proven Fact, in order to squeeze the juice, the best time to trade forex is in between the time period, when multiple trading sessions overlap because this is the peak time when market offers the best price action, liquidity and volatility. I have above mentioned both the time periods of overlapping. After this overlapping time period, the best time to trade is in the London session because London is the heart of the forex market.
Best Days for Trading Forex
As trading forex at an appropriate time is preferable, so does the trading at appropriate days are equally important to benefit the most from forex trading.
According to the currency pair’s volatility, it is observed that the first half day i.e. Monday starts slowly and is mostly quiet until the overlapping of New York and London session because everyone is observing the market as what is the current equation of demand and supply, and slowly everyone start opening positions and/or place open orders. It is after this time period that the market gets into the action and the trading activity, which includes price action; liquidity and volatility are at its best for the whole middle of the week, and as is the slow start of Monday, the ending session of Friday is also the same because most of the traders try to close their positions on Friday. This means we should not create a fresh position after the London session ends on Friday.
We get an additional half day holiday on Fridays, Yippee! Our weekends always start early!
Worst Times and When Not to Trade Forex?
Late Sunday and Half Monday –
Everybody is sleeping, enjoying their weekends and/or re-analyzing the market direction due to the 2 day holiday, before entering a position.
Major News Events –
A forex trader should be aware of the scheduled major news releases, economic news and speeches. These major news events can be easily found in advance by just visiting an online forex economic calendar. Trading without knowledge of these major news events can easily whipsaw your trade. There is no limitation of the price spike, and it can be nothing or anything like hundreds of pips.
Bizarre Periods –
There may be some times when a currency pair is not showing a normal price action, which means, it’s spiking or showing random moves, and you may not be able to understand the reason for such bizarre price action, the reason for this can be anything, which includes any unscheduled news, any leaked news or just anything. It is better staying out of the market until the price action becomes normal.
Most of the forex traders do not prefer to hold their positions over the weekend, in order to avoid the opening gaps of Monday as, so the liquidity dies and also the market slows down, so it is a good idea to manage only the open trades on Friday after the closing of London session.
December & Summer Holidays –
Holidays are for fun, so enjoy them, Cheers...
While building a forex trading strategy, make sure you also setup a comfortable time schedule to squeeze the juice from the forex market. Trading only at the best times is sufficient and we can get the desired results by trading for only a couple of hours.
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