The Best and Worst Times to Trade Forex

1With international markets being now in instant reach, foreign exchange trading is now a 24 hour a day endeavour, if you choose it to be.  So at any time, you really are spoilt for choice about which markets to trade in, and which currency pairs to trade between. The world really is at your fingertips.  However, don’t let that fact destroy your trading discipline, because just like all trading, timing is absolutely vital.  Let’s take a closer look.

Multiple Foreign Exchange Markets Open At Once

One simple fact is that with so many financial markets open across the globe, there’s huge time zone overlaps with multiple international markets open at once.  This is great for liquidity and potential arbitrage (if you’re quick) but can potentially paralyze you with too many choices and options.

One of the major trading overlaps is the European and North American markets.  This in particular is when London and New York, the two major foreign exchange trading centres are open.  Trading volume during this time is huge meaning spreads are narrower (better prices for you) and there’s more stability in the market, simply due to volume.

And if forex trading does interest you, you may want to look into spread betting, which in fact can be used to invest in almost any outcome.  To find out more, you may want to read about what is spread betting to give you an idea of how to approach this investment opportunity.

Times to Avoid

Simply put, when there’s less trading volume, this is a time when you may want to avoid trading, if possible.  But that said, that’s only really true if you’re in and out of positions very quickly.  Whereas, if you’re in the buy and hold mindset, the trading volume at the time you buy doesn’t really affect you, since you’re in it for the long term anyway.

But it’s well worth noting that thinner trading volumes does mean price spreads can widen, so during quiet periods you may spend more to get less (only marginally so, though).

Weekends Are Slow

Continuing from the “thinner trading periods” train of thought, it’s best to avoid the weekend.  This includes afternoon and certainly evening Friday, as the market is already mentally away from the desk.  And unless there’s major news on a Friday, trading volume will start to wind down, until Monday morning.

Avoiding Major Economic News

Unless you have a strong stomach and funds to match, times of major economic announcements create volatility, which of course is great if you’re on the right side of the bet, but that certainly isn’t guaranteed.

For example, job figures, farm payroll figures, and Fed meeting minutes are all times when the news that comes out can have a dramatic effect on the currency as investors rethink their position on the future of that country. Remember the Swiss Franc becoming unpegged?  No one saw that one coming and a 40% overnight drop in the currency occurred, which is practically unheard of.

So to wrap up – avoid quiet periods as this creates wider spreads.  And volatility of high trading volumes is where the short term profits are, but only if you’re ready to handle the risk.

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