Identify your Ideal Forex Trading Hours
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(eToro Blog) While it’s true that the forex markets are open for more than 120 hours a week, it doesn’t mean that each and every one of those hours has the same trading potential. The goal is to trade during the periods of higher volatility because volatility means a moving market and money can only be made when the market is moving. Periods of quiet and calm are great for when you want to rest, not for when you want to invest.
Just as all hours are not created equal in the forex markets, neither are all trading sessions, or at least that is dependent on the currency pairs you choose to trade. There are three major trading sessions; i.e. the Asian session, the London session and the New York session and there are hours during the trading day when the closing of one session overlaps with the opening of another. During those periods you tend to see higher volatility, with the highest usually seen during the overlap of the London session and the New York session.
For traders who rely on price action strategies, and especially those who favor the EUR/USD pair (given that it is the most heavily traded of all currency pairs) the four hours which overlap London and New York between 8:00 a.m. (EST) and 12:00 p.m. (EST) are the most active and thus the most promising. Quite a few traders will eschew all other time frames to trade only in this window. The majority of economic news events for the U.S., as well as Canada, are released during this window.
But for other traders, their best opportunity depends on the currency pairs they trade; for example, traders who favor the Yen or the Aussie or Kiwi Dollars might prefer the Asian trading session. The Japanese Yen is also a favorite to include in a currency pair, given its safe haven status, and one out of every five pairs crosses the Yen. The Asian session may need another impetus to spur a rise in volatility and in that case it is often some fundamental factor which influences the pair, such as a central bank announcement or other economic development.
The London session overlaps both the Asian session and the New York session and thus sees a great deal of liquidity and volume, more so than the other two. Major news events in the Eurozone naturally have an effect on the Euro and the Swiss Franc as well as other European currencies, and of course whatever currency they cross in a trade.
Historically and statistically, the best trading days to see larger price movements are those in the middle of the week and through noon on Friday in New York. Monday tends to be relatively quiet, as statistics have shown, but the People’s Bank of China has been known to make policy announcements over the weekend which can influence the Aussie or Kiwi right from the start, given that they are both export oriented countries and China is their primary trading partner.
Copyright 2012 eToro Blog
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