Forex trading times

The best times to trade the market..

An important, but often neglected aspect of trade timing involves not just the placement of stop-loss/take-profit orders, but also the choice of the correct timeframe for our trading activities. A keen observer of the markets will not fail to notice the undulating pattern of intensifying and lessening activity during the various phases of the day.

There are two factors influencing volatility and liquidity in the market on a regular basis, one is the news flow, and the other is money flow. By money flow we describe the entry or exit of liquidity from the market as various banks around the globe open and close throughout the day, leading to varying degrees of activity at different times. News flow, of course, signifies the tensions that accompany the release of information to the markets. Understanding and analyzing these time periods has important consequences for forex strategies, and also the choice of forex brokers.

In general the most active period in a trading day is between 8 am and 10 am EST. Not only are all three major markets of the West in Frankfurt, London, and New York are active at this time, but also option expiries, new releases, and press conferences are often clustered at the same time period, leading to very volatile, and active trading. With volatility comes both risk and opportunity. You can make small fortunes during these periods if you’re on the right side of the market, but also, if you make mistakes, the costs are likely to be higher. This period is also preferred by some scalpers who like to trade in volatile forex markets.

The period between 11 am and 1 pm is usually one of the calmer times of the day, especially during lunch when trading slows down perceptibly. Since the same period also presents a brief counter-trend correction, it may be used as an entry zone by a trader who missed the early momentum of the day, but still has confidence in the underlying daily trend.

Finally, the time period between 4 am and 7 am, when banks across the U.S. are closing gradually leads to very subdued and stake market conditions. Traders who want to exploit such conditions will find this a low-risk environment, and it is generally thought that this timeframe provides the greatest opportunities for learning scalping with low risk.

Forex trading strategies depend on many different factors, including liquidity, volatility, the time of the day, and the time of the year. Strategies that work in the summer months may not perform that well in October, for example. Understanding these factors, and adapting your trading to exploit them to the greatest extent possible will increase your profitability, and confidence in your decisions.