There’s a time for sleeping, there’s a time for working. And there’s a time for forex trading too. The forex market is open around the clock, on all five days of the week as the Sun moves around the world, and banks open and close in various regions of the world. Although this is an advantage, it doesn’t mean that the same conditions and opportunities are available to traders at all times, as the day runs its course. It’s clear that the volume and volatility of the forex market will be very different when among major markets only Japan and Australia are open. To find the most active and profitable time period for trading is one of the main issues faced by forex traders, and we’ll take a look at it here.
It is in general agreed that the time period between 12 pm GMT and 3 pm GMT are the most active times for traders who seek to capitalize from the largest movements in the market. The New York markets open at around 12 GMT, and trading in London closes at 3 pm, so the time period in between sees the largest amount of liquidity reaching the markets. Although this is true, it is important to know that the opening and closing of the markets is a lot more gradual than what would be suggested by these hours. London and New York are two very important financial centers, but banks open and close all around the U.S. as the day passes, and the same is the case with the European market too.
The best time period for a trader is also dependent on the trading style and strategy. The previously mentioned period is good for day traders, scalpers, and others who use short term methods for profiting from short term fluctuations and events. Swing traders do better in a low volatility environment, so the time period after the close of the London market, at around 3 pm, could be the best time for swing trading. Conversely, if you’re a long time trader who concentrates on weekly, or monthly trends, trade timing will be of little significance to you.
This article is not intended as a complete guide to all the timing related issues in forex. With a careful and patient study, it could be possible to extend your understanding of this subject to devise many different strategies based on timing. Still, the points mentioned here can give you an idea of the issues involved while creating a forex strategy based on market times.
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Editors’ Picks
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EUR/USD extended its daily decline toward 1.0500 in the second half of the American session, pressured by the souring market mood. Despite the bullish action seen earlier in the week, the pair remains on track to register weekly losses.
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