The Perfect Time to Trade Forex

Timing is everything when you trade Forex. Especially as concerns intraday traders the right timing is really making the difference between winners and losers.

Forex Trading Sessions

The Forex market is divided into the Pacific session, Asian session, European session and the North American session.

Forex Session
Major Market
Hours (GMT)
Hours (EST)
Most Traded Pairs
Pacific
Sydney
9 pm to 6 am
5 pm to 2 am
AUD/USD
EUR/USD
AUD/JPY
Asian
Tokyo
11 pm to 8 am
7 pm to 4 am

EUR/JPY
USD/JPY

European
London
7 am to 4 pm
3 am to 00
EUR/USD
USD/CHF
GBP/USD
North American
New York
00 to 9 pm
8 am to 5 pm
EUR/USD
USD/CHF
GBP/USD

Days of the Week with the Highest Activity

Avoid to trade the Forex Market on Monday, as Mondays are usually flat in terms of volatility. Avoid to trade also late on Friday as on Fridays traders usually close their positions.

According to historical research the best days to trade Forex is in the middle of the week, and especially Wednesday. 

Forex Market Overlaps 

Choose to trade when the activity peaks. For example as concerns EUR/USD and GBP/USD the maximum activity occurs during London and New York sessions overlap. That means from 8 am to 12 am EST. High volume activity and high volatility make things easier for short-term traders.

Forex overlaps occur when two of the above sessions are opened simultaneously. Here are the three Forex Session Overlaps: 

(i) New York and London Session Overlap: 8:00 am to 00:00 (EST)

(ii) Sydney and Tokyo Session Overlap: 7:00 pm to 2:00 am (EST )

(iii) London and Tokyo Session Overlap: 3:00 am to 4:00 am (EST) 

During these overlaps, both trading activity and market liquidity are maximized. Many traders select to execute orders only during these overlaps. To highlight the importance of time when trading Forex, just think that there are automated systems trading exclusively the London and Tokyo Overlap. That means that during the other sessions remain inactive.

Evaluate your Performance in a Long-Term Timeframe

Many traders get too excited or too disappointed after the first couple of weeks. This is wrong. You must evaluate your performance in a larger time scale. For example you can use a monthly time frame if you trade short-term or a 6-month time frame if you trade Forex long-term. If you aren’t patient enough you will not be able to evaluate a Trading Strategy right. For example you may loose 5 trades in a row (-10 pips each) and after win a trade of 100 pips. The overall performance will be positive by 50 pips.

Evaluate the Currency Pairs you are Trading

It is very important to know the historical volatility of any currency pair. We can group Forex Currencies according to their past volatility as follows:

(1) High –Volatility Group: GBP/AUD, GBP/USD, GBP/CAD, GBP/CHF, GBP/NZD, EUR/AUD, GBP/JPY, and EUR/CAD

(2) High to Middle –Volatility Group: EUR/USD, USD/JPY, USD/CHF, EUR/JPY, CAD/JPY and USD/CAD

(3) Middle to Low –Volatility Group: EUR/CHF, AUD/USD, and AUD/JPY

(4) Low–Volatility Group: NZD/USD, NZD/JPY, AUD/NZD, EUR/GBP, AUD/CAD and CHF/JPY


Forex Heat-Map

A Forex heat map may offers you a brief picture about what is happening today in the Forex market. Especially if you are a novice trader a heat-map may prove a very helpful tool. Here is an example of a Forex heat map:

JPY / GBP
+0.72%
JPY/CAD
+0.66%
JPY/EUR
+0.64%
AUD/EUR
+0.580
AUD/GBP
+0.54%
AUD/CAD
+0.53%
JPY/CHF
+0.48%
AUD/CHF
+0.38%
JPY/USD
+0.36%
AUD/USD
+0.31%
USD/GBP
+0.27%
USD/EUR
+0.26%
CHF/GBP
+0.25%
CHF/EUR
+0.22%
USD/CAD
+0.21%
JPY/AUD
+0.20%
CHF/CAD
+0.17%
USD/CHF
+0.07%
CAD/GBP
+0.04%
GBP/EUR
+0.03%
CAD/EUR
+0.03%
GBP/CAD
-0.02%
EUR/GBP
-0.04%
AUD/JPY
-0.05%
EUR/CAD
-0.05%
CHF/USD
-0.05%
CAD/CHF
-0.12%
GBP/CHF
-0.16%
 
The Time Not-To-Trade

In general there are times you shouldn’t try to trade at all Forex. For example times that you feel highly emotional, times when you are sick or times facing major computer or other technological issues. Stop-Orders will provide you with a safe shield if everything goes wrong.

Avoid Trading on Mondays, end of the Week, end of the Month, end of the Quarter, end of the Year


Furthermore you should pre-determine an overall stop-loss level. For example if you trade intraday and you have lost more than 5% of your funds in a single day, it’s better to stop trading. Don’t try to cover your losses, simply accept them and try again tomorrow. All Forex traders have bad days but what distinguish winners from losers is that winners accept their losses and move forward the next day. 

 

Forex Trading & Time

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