The decentralized Forex market is open 24 hours a day, 5 days a week. Quotes of the currency pairs are constantly jumping because some traders are buying dollars, while others are trying to get rid of the Japanese yen in a panic.
This is what day traders and gladiators have in common: their job is to enter the market every day to earn money. In spite of the risks, there is always hope for success.
However, not every trader knows that Forex assets have their time-bound peculiarities. We are going to tell you more about them.
The difference in working hours of the world’s largest financial centers separated the market into 4 trading sessions: Asian, European, American, and Pacific.
As a rule, the peak trading activity of a certain currency can be tracked its “native” trading session. That is, the yen and yuan are more volatile during the Asian session, and the New Zealand and Australian dollars are more active during the Pacific session. The American trading session is the most active part of the day, so it is considered to be the best time for day trading.
You can see the schedule of trading sessions in the table below. Note that the surge in volatility can occur a bit earlier or later. It is normal for the currency market.
Tokyo, Hong Kong, Shanghai, Seoul
00:00 — 08:00
London, Frankfurt, Zurich
06:00 — 16:00
New York, Chicago
15:00 — 23:00
22:00 — 07:00
Many traders are wondering what they should look at or follow when trading Forex. Experienced investors suggest traders study the economic calendar —one of the main instruments of Forex traders—before they start working. In the calendar, you will find a schedule of all important economic releases in most countries.
As soon as the whole world is waiting for the calendar news to come out, the reaction to releases is really strong. For example, the US dollar strengthened significantly after the release of the APD report on new jobs on September 5. The result was “better than expected”.
The list of the key news include:
- Central bank interest rate decisions.
- GDP reports.
- Employment rate.
- Consumer price index.
The importance of the event is also marked by the number of bullheads. Very important events are marked by three bullheads. If there is just one bullhead, no market reaction to such news is expected.
We can make the following conclusion: the more calendar releases are published on a particular day, the more active that trading day is.
Days of week
The volatility of trading Forex also depends on the day of the week. This fact is proven by statistics, and the economic calendar lets us get a link between days and the volatility.
For example, if a country decides to publish a monthly report on GDP on Thursday instead of Wednesday, the usual market volatility will gradually shift to Thursday. Accordingly, traders will be more likely to make a profit on Thursday than on Wednesday.
Especially for you, we made up a volatility chart for the main currency pairs.
Higher trading volume hunters should understand when it is better not to trade Forex, and which days will be better for making a profit.
If you followed the 2016 US presidential race as a trader, you should have noted an increase in gold volatility. A long-term flat changed for a two-month bearish trend.
If a trader opened a $100 short position using the x100 multiplier at the level of 1237.00 and closed it at 1132.00, it would add more than $1000 of profit to his trading account.
Thus, if European countries like Germany and France or the US, Russia, Australia, Japan, and others are to hold elections (presidential or parliamentary) in the near future, traders can take advantage of this political process.
A fiscal year is a period used by companies or governments for planning budgets. When it’s coming to its end, new strategic decisions may be made that will affect exchange rates or other assets.
The US fiscal year starts on October 1 and ends on September 30. Partly for this reason, the volatility increases in autumn, and traders are waiting for it.
Recall that such events as the 2008 financial crisis, the Great Depression, Black Monday in 1987 were actively developing from September to December. Odds are, new shocks may take place in autumn.
Prepare a trading plan
Now you know the basic time factors that affect trading Forex. This is enough to make a quality trading plan. Specify the periods when you will be trading and when you will be doing other things before you start working.
Use historical data
The historical chart will help you find most of the peculiarities of the market. Many traders study it for patterns, including the time-bound ones. You can also use historical data to test a strategy or technical analysis method.
Do not open positions at the moment of the news release
Market conditions may get different from 5 to 10 minutes before and after the news release. To avoid opening a trade with extra fees or at a markedly changed price, we do not recommend trading during this time. However, some traders are risky enough to choose this very period for opening positions. Anyway, it’s up to you to decide.