How To Trade Using Forex

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CFDs are complex instruments and carry a high risk of losing money quickly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can accept the high risk of losing your money.

One of the many advantages of the forex market is that it is open for trading 24 hours a day. Unlike the stock market, the money market operates on the normal working hours of three trading centers in different time zones. Traders have the freedom to trade whenever they want based on their needs.

How To Trade Using Forex

How To Trade Using Forex

Objectively, there is no such thing as the best time to trade in Forex for a trader – it all depends on preferences, goals and trading strategies. In this article, we’ll look at how day and night in different parts of the world affect different currency pairs and your trading in general. We will also focus on the two main fundamental forces – supply and demand – to identify the best time for you to trade forex.

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Liquidity—finding a counterparty to any trade—can be a problem in some financial markets, but not in foreign exchange. While liquidity is not important when choosing the best time of day to trade forex, it is important for background knowledge. Most retailers trade with a market maker broker who is always ready and willing to execute orders for them.

In these cases, a problem may arise only when the broker has trouble filling interbank orders. An example of this happened in CHF on January 15, 2015, when the Swiss National Bank canceled the euro peg – a gap is a gap for everyone. Forex is a real liquidity miracle and the price gap is so rare that it usually takes months of trading for a beginner trader to see it with his own eyes.

Volatility deals with how strong price movements can be at a particular time of day and it varies a lot for each pair and at any given time of day in the currency market. Understanding volatility is critical for traders, as the vast majority of trading strategies are incompatible with periods of high volatility. Market tests clearly show that tailoring a trading plan to the strategy’s desired volatility can make the difference between big losses and big gains, even when all other things are equal.

For example, an oscillator-based trading strategy that is more suited to different markets and exits at key “retracement” levels will not benefit much from breakouts at high volatility levels. When you create or consider a strategy, check what level of volatility it will work with and apply it accordingly. Fluctuating periods are not always the best time to trade forex.

Forex Trading Tips For Beginners

Why do levels of volatility vary from day to day for each instrument and why does the price change at all? The answer simply depends on supply and demand. The market, forex or anything else, moves because of a large number of orders that cannot be filled. The greater their number and the greater their volume – the greater the volatility of the market. Now let’s see who are the main drivers of the market.

Organizations place the most orders in the most number and between the specified times. Unlike private traders who are free to trade as they please, institutions operate according to the business hours of the commercial capitals of the world. This is why the 24-hour forex trading day is divided into three international trading sessions – Asia/Pacific, London/Europe and North America.

Did you know that Admirals offers an advanced version of Metatrader that increases trading capabilities? You can now trade with MetaTrader 4 and MetaTrader 5 with MetaTrader Advanced, which offers great additional features such as the correlation matrix that lets you view and compare different currency pairs in real-time, or the mini-trader widget that lets you. You can buy or sell through a small window while dealing with anything else you need to do.

How To Trade Using Forex

The trading day officially begins in Australia when the Sydney and New Zealand agencies open at around 9am (GMT+10), marking the start of the Asia Pacific trading session. In the next two hours, they will join Tokyo, where most Asian currency trades take place, followed by Hong Kong and Singapore.

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At the start of the Asia-Pacific session on Sunday evening, currency markets open for the week, as individual traders and institutions try to stabilize following potentially related events over the weekend. This is the only time of the week that these gaps occur regularly, which means that if gaps are exactly what you are looking for, weekend trading is not the best time to trade forex.

At 7:00 AM GMT, the Asia/Pacific session will gradually give way to the London/European session. Frankfurt – the financial heart of Europe – starts an hour ahead of London, but this delay is largely ignored. At 12:00 GMT, the North American trading session begins with New York followed by Los Angeles. By nightfall in Los Angeles, the market will slow down and the current trading day will be over. As world trade meetings gradually flow into each other, there will be some overlap.

Market volume and prices may increase early in the morning. Credit for all news releases related to opening hours represents the window in which the market factors from the time of the pre-closing bell. A skilled trader can spot the right patterns and make quick profits, but a less skilled trader can suffer serious losses as a result. So, if you are new, you may want to avoid trading during these volatile hours, or at least the first hour.

However, for experienced day traders, the first 15 minutes after the opening bell are prime time, usually yielding the biggest trades of the day in early trends. Seasoned trading expert Marcus Gable shares his trading strategy in the free webinar below.

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Morning hours are prime time for announcements from monetary policy makers and other related news. The beginning of the day is also when institutional traders are most active, as it is the best time of day to trade forex. This activity helps increase volatility levels. The money relationship is logical. If it’s morning in London, the Bank of England releases financial news and British companies cover their orders to hedge their future purchases of sterling.

So it makes sense to speculate in the British banks and funds market. Because of this, private traders in the UK will be more active during the day, but their influence will be relatively small. This is due to the small volume they generate and the low limit of private traders for money. This situation applies to other countries and currencies, so if you are looking for market volatility as part of your trading strategy, the best time of day to trade forex for you is to coincide with the big drivers.

The London session will be the most volatile time of the day for currencies and European currency pairs. Here we are mostly talking about EUR, GBP and CHF. Similarly, currencies of countries geographically located in the Asia-Pacific region such as Yen, Australian Dollar, Australian Dollar, NZD and to some extent SGD and HKD are mainly traded during the Asia-Pacific session. Finally, USD, CAD, and MXN increased volatility during the North American session.

How To Trade Using Forex

Currently, as mentioned above, due to the overlap of trading sessions, currency pairs are often composed of currencies from different regions, and volatility fluctuations are quite distorted.

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London/New York will have the heaviest overlap. Not surprisingly, EUR/USD is the most traded pair and GBP/USD is the third most traded pair. Tokyo/London is another big one, giving ground to FX crosses like EUR/JPY and GBP/JPY when most US triggers are relatively inactive. Finally, because Tokyo is 16 hours ahead of Los Angeles, this overlap accounts for minimal commercial activity.

Another thing to remember is that most of the volume in the forex market comes from the spot forex market, which is where most retail traders trade. While the currency market is open 24/5, the futures market is tied to physical exchanges. Specifically, to the Chicago Mercantile Exchange and several of its partners (called introducing brokers) throughout the United States and abroad. The importance of this point is to reinforce the notion that in the futures market, only all pairs are tradable.

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