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Timing is Everything: The Best Times to (and not to) Trade Forex

    

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As you probably already know, the forex market is open and active 24 hours a day, seven days a week. Traders can log in to a trading platform at any time to move currency around, but this doesn’t necessarily mean that people should be trading around the clock. When trading forex, timing can often be everything, as there will always be good times to trade and not-so-good times to trade. To ensure that you only trade at the optimum moments, here are the best times to trade forex, along with the times when it’s worth staying away from the market.

Best Times to Trade

  • Monday afternoon

Monday mornings may very well be a time to avoid when it comes to trading, but Monday afternoons are a different story. This is because the market really does start to warm up, with trading volume increasing. Again, you can’t expect the forex market to reach peak liquidity during this time, but it’s still worth taking a look at the market when Monday afternoon rolls around.


  • When multiple trading sessions overlap

London ranks as the busiest trading session, with New York not too far behind. As such, you can expect the session overlap to be a busy period that provides plenty of trading opportunity. Many professional traders (or at least those who trade full time) often consider 14:00 GMT to be the optimum time to enter the market, as it’s the time when London is drawing to a close and many are awaiting the shift to New York. Although price movements can be choppy and somewhat unpredictable during this time, the big swings open the door for  more profitable opportunities.


There is another overlap between Sydney and Tokyo that occurs between 12:00 GMT and 07:00 GMT—while not as prominent as London/New York, it still proves to be a smart time to trade.


  • During times of high liquidity (i.e., Tuesday through Thursday)

Things certainly pick up during Monday afternoons, but the forex market doesn’t reach peak liquidity until Tuesday at the earliest. The forex market is most noticeably active during the middle the week, specifically Tuesdays through Thursdays. If liquidity is what you’re after, look to keep the bulk of your trading locked to the middle of the week because this is when trading activity is at its height.


  • London session

Every trading session (or window) has the potential to get extremely busy, but one remains far busier than all others. The London sessions (sometimes listed as the European sessions) are known for being the times when trading peaks, with approximately 30 percent of all trades taking place during these windows.

Worst Times to Trade

  • Late Sunday/early Monday

Looking at the worst time to trade forex, there is nothing more slumber-inducing than the late Sunday/early Monday crossover. During this time, everything remains slow, and many people use the crossover period to reassess and plan for the week ahead instead of actively trading. The majority of investors avoid making trades as the new week dawns, so it’s fair to say that you should do the same.


  • National holidays

National holidays are unavoidable, but the free time you have on these days isn’t something that you should translate into trading activity. Banks are one of the biggest influencers on the forex market, so their closure on holidays is a telling sign. When they’re not open and operating, the volume of forex transactions being carried out is greatly reduced. This can lead to a static market or erratic price behavior.


  • During major news releases

The forex market is driven by financial reports, economic data, and political updates, with the temptation being to trade when these grip the market. While doing this may put you at the heart of the action, unless you have a firm understanding of how to trade the news, it’s recommend that you stay away. Updates, data, and reports can have unpredictable effects on the forex market, especially when news arrives unexpectedly. Track major news releases through a forex economic calendar so you can stay ahead of what’s coming.


  • During times of strange price action

There will be times when a forex pair throws up strange price action, without any notable rhyme or reason. Random moves may give the market an exciting feel, but they generally make for rocky trading terrain. This means that it can be extremely difficult to grasp what is causing such price shifts and the general market sentiment. For that reason, when strange price action occurs, it’s best to wait out the storm until the bizarre market behavior concludes.


  • Asian sessions when liquidity is lower, particularly near end-of-day crossover time

Low levels of liquidity, which plague Asian sessions, rightfully represent a red flag. The amount of resources traded during Asian market sessions is often very low, so the average pip movements are too low to cover the high spreads of the Asian currencies. This is especially true near the end-of-day rollover time.

Conclusion

Forex trading success is undoubtedly built upon a foundation of commitment and execution, from education all the way through to trading strategy development. On top of that, timing also plays a more important role than most people probably realize, allowing you to truly pick your moments. Thanks to the above information, you now have a firm grasp on when you should and shouldn’t be trading forex.

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Disclaimer:

The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

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