Many first-time forex traders hit the market. They watch the various economic calendars, greedily trade every data release, and view the forex market, which operates 24 hours a day, 5 days a week, as a convenient way to trade around the clock. Not only can this strategy drain a trader's bankroll quickly, but it can break even the hardiest of traders. Unlike Wall Street, which operates during normal office hours, the forex market operates during normal office hours in 4 different regions of the world, each in a different time zone, meaning trading can be done all day and all night.
So, what are the alternatives to staying up all night? If traders can gain an understanding of market timing and set appropriate goals, they will have a better chance of making a profit within a feasible time frame.
Understanding the forex market
Forex trading is unique because of the hours it runs. Runs weekly from Sunday 6pm EST to Friday 5pm EST.
The best time to trade is when the market is most active, as not all hours of the day are favorable for trading. When more than 1 of the 4 markets are open at the same time, the trading atmosphere will heat up, which means that the currency pair will be more volatile.
When only one market is open, currency pairs tend to move in a small range of about 30 pips. With both markets open at the same time, volatility can easily reach 70 points, especially when there is a big news release.
First, here is an overview of the 4 markets (EST)
New York (8:00 am to 5:00 pm): New York is the second largest foreign exchange platform in the world and is of great concern to foreign exchange investors because the US dollar accounts for all transactions. than 90%. Movements in the NYSE can have an immediate, powerful impact on the dollar. When a company merger is completed, the dollar will immediately appreciate or depreciate.
Tokyo (7:00 p.m. to 4:00 a.m.): Asia's No. 1 trading center opened in Tokyo, which accounted for the largest trading volume in Asia, followed by Hong Kong and Singapore. The most traded currency pairs are usually USDJPY, GBPCHF and GBPJPY. The USD/JPY is of particular interest when only Tokyo markets are open because the Bank of Japan has a large influence on the market.
Sydney (5pm-2am): Sydney is where the trading day officially begins and although it is the smallest of the 4 markets, it will see a lot of initial trading when the market reopens on Sunday afternoon as the After all the action late Friday afternoon, individual traders and financial institutions tried to stabilize.
London (3:00 am to noon): The UK dominates the global foreign exchange market, of which London is a major component. London, the trading capital of the world, accounts for 34% of the global trading volume. London also has a major influence on currency fluctuations as it is home to the Bank of England, which sets interest rates on the pound and controls monetary policy. Forex trends also often originate in London, which is an important point to keep in mind for technical traders.
Overlap of Forex Trading Sessions
The best time to trade is during periods of overlapping trading sessions between open markets, meaning high price volatility and thus better opportunities. Below are the 3 overlapping sessions per day:
US/London (8:00 am to noon): The largest overlapping session in the market occurs in the US/London market. 70% of trades take place during this session, as the dollar and euro are the two most traded currencies. This is an ideal time to trade because volatility is high.
Sydney/Tokyo (2am-4am): This timeframe is less volatile than the US/London overlap, but still offers an opportunity to trade during periods of high volatility. EURJPY is an ideal currency pair as it is the two most affected currencies.
London/Tokyo (3:00 am to 4:00 am): Due to time reasons (most US traders are not up yet), this period trades the least of the 3 overlapping periods, and there is no chance of seeing a large increase in the 1 hour overlapping period fluctuation.
The Impact of News Releases in the Forex Market
While understanding the markets and their overlapping periods may help traders time their trades, there is one more effect that should not be forgotten: news releases.
A major news release can liven up a normally slow trading session. When major announcements are made about economic data, especially if it does not match expectations, currencies can depreciate or appreciate within seconds.
While there are dozens of economic data releases daily across all time zones, affecting all currencies, traders don't have to pay attention to all of them, it's important to prioritize the news releases to watch and monitor.
Key news releases include:
Interest Rate Decision
Consumer Price Index
Trade Deficit
Consumer Spending
Central Bank Meeting
Consumer Confidence
GDP Data
Unemployment Rate
Retail Data
Conclusion
When setting a trading schedule it is important to take advantage of periods of market overlap and pay close attention Press Releases. Traders looking to generate profit growth should trade during periods of high volatility while monitoring news and data releases. This balance allows both full-time and part-time traders to create schedules that give them peace of mind knowing that when they take a break from watching the markets or need a few hours of sleep, no chance will slip by.
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