When is the best time for trading at Forex? 02-11-2016 by Liteforex
Training materials dealing with the basic ideas of Forex trading. The materials of this section will help you understand the Forex market faster than you think.
How to decided when is the best time for trading at Forex if each session has its own unique characteristics? Let’s examine characteristics of each session and determine if there is the best time to trade on Forex.
As you know, demand for the national currency increases at the opening of the trading session in this country. For example, trading volume in the yen increases during the Asian session because at that time Japanese companies buy and sell currency pairs with the Yen in order to do business with the companies in other countries. Demand for the Euro is increasing during the European session. At nights trading slows down as European companies are closed and business with other foreign companies is decreasing.
Therefore, volatility of different trading instruments changes from session to session.
- Trading day starts at the Asian session, which opens at 22:00 (GMT) with the opening of trade exchanges in Sydney. Usually, changes to the exchange rates are minor at this session and trading volume is low. This "lull" continues till the opening of the exchange in Tokyo at 00:00 (GMT). At this trading session the demand for the Yen, Australian dollar and New Zealand dollar is usually high.
- One hour before closing of the trading session in Tokyo, London stock exchange opens at 8:00 (GMT). At this time the number of trading participants grows significantly, the demand for all currency pairs increases, trading volumes are high, while spreads are reducing. Liquidity during the European session is also very high. About 40% of the total trades is carried out at the European session.
- At 13:00 (GMT) New York exchanges opens and the American session starts. Until 17:00 (GMT) both European and American exchanges work simultaneously, which increases trading volume and volatility. It is believed that at this period trading is the most active and aggressive, as volatility is high, which leads to the rapid changes in price.
As you can see it is possible to earn money at Forex at any time. Therefore, there is no the best time for trading. Traders can choose the most suitable time for them with respect to the currency pairs and trading strategy they use.
However, there are some recommendations on the timing of transactions. At the time of the overlap of the sessions and the release of the important financial news, volatility in the pairs increases, which requires from a trader great attention and prompt reaction when opening new positions, as at this time prices can suddenly change movement direction. It is important to know the time of major economic events in order to avoid trading in such periods of high volatility as the risk of loss is significantly increasing. During the days of public holiday trading activity is usually low.
Information on the time of the trading sessions and the other fundamental factors is as important a trader as the technical tools.
Let’s view the procedure of making trades at Forex market.
A trader selects a broker, opens an account and makes a deposit. After that he/she can start trading in the market. What are the principles of online trading? A broker is an intermediary, which facilitates trades. When a client signs a contract with a broker, he/she receives a trading account and access to the software for making transactions.
"Trading terminal shows the current quotes of all trading assets and has a comprehensive set of tools of technical analysis on the price charts."
After making an analysis and taking trading decision to open a trading position, a trader gives a trading order for a specified volume to a broker. Volume in Forex is calculated in standard lot of 100 000 units of the base currency. The volume depends on the type of trading account. Many brokers offer to open micro –accounts, enabling a trader trade with the lowest possible volume.
After opening a position, a trader waits till the price approaches the desired price level for closing a position and profit taking. The difference between the opening and closing prices is calculated in pips and makes your profit. Knowing the value of a pip, a trader can calculate his/her profit in cash.
Here is an example of making a trade at Forex:
- Let’s assume that the price of the currency pair EURUSD is 1.1040.
- After making an analysis and forecast of the movement in the pair a trader makes a decision to open a long position.
- A trader buys one standard lot at the current price of $110.400 per Euro.
- A target for taking profit is at the price level of $1.1096.
- A trader can close a position either manually or placing an order which will be executed automatically when the price reaches specified price level.
- In the result of the sell transaction of one lot at the price of 1.1096, a trader buys 110. 960 USD.
- Profit in this case will amount to 56 points, or 560 USD.