How to choose the best time to trade forex (time management)
When trading on financial markets, not only trading strategy and money management are very important for success, which together make up a trader's trading system, but also the timing of forex trading.
There are four distinctive trading sessions on the currency market: Pacific, Asian, European and American. Due to the fact that the Pacific and Asian session is not particularly volatile, it makes no sense to consider the Pacific session separately, so let us limit ourselves to the overview of the three major session periods.
Forex trading hours and the description of the trading sessions
The first one in the day, from 00:00 GMT is the Asian trading session. The main participants here are traders from South East Asia. For Russians, except those living in Eastern Siberia and the Far East, this is not the best time for Forex trading. However, a number of traders living in the European part of the world prefer to trade during this time, using the quiet dynamics of assets and low market volatility. There are even special strategies for the Asian session.
Nevertheless, the main movements even with such popular Asian currencies as the yen occur in other trading sessions, although regional news can cause a burst of currency pairs.
The main things to pay attention to when trading during this period are news releases at 03:00 and actions of the People's Bank of China, which is a major buyer of foreign currencies and periodically tries to correct the yuan.
During European trading session that starts at 09:00 the market activity is higher. Traders process overnight news and monitor various economic indicators.
The hours between 09:00 and 13:00 (Greenwich Mean Time) are probably the best time to trade forex.
From 12:00 to 14:00 hours, important news are usually published for Germany and the Eurozone, and then data from the UK starts coming in. The whole flow of information is processed by the market until about 16:00.
The most aggressive trading session is American session, which starts at 16:00, and at 16:30 the first block of important news is released. Traders work with the information for about two hours, then market activity begins to decline. The exceptions are the days of Fed meetings followed by the conference of the Fed's head. At such times volatile forex trading will last almost until the Asian session starts.
What is the best time to trade forex?
Forex trading is available 24 hours a day, that is why beginners have a false impression that you can always earn on the currency market, if you have a free minute for trading. In fact, this is not true, as not only trading sessions differ in the degree of activity, but also in intra-session periods. Professionals, as a rule, make profit when quotations move actively as much as possible.
In this regard, we can distinguish the most attractive trading hours on forex:
- The intersection of trading session times. Here you may use Forex trading session indicators, which are easily installed on the charts of currency pairs;
- Release of important news, reports, releases, publications and economic indicators;
- Actions of major players such as major central banks.
However, traders should keep in mind that trading Forex news on the one hand allows traders to make quick profits and on the other hand they can take losses, so scalping aficionados are advised to close all deals at these moments.
During the big players' entrance into the market it is also better to refrain from trading, because it is initially unclear about their plans.
Unfavorable days for trading are those when regional exchanges are closed and the Central Bank is not working. Assets during such periods move in narrow corridors and market activity is minimal.
Friday is also not the best time to trade forex, when most market participants begin to take positions, and it is difficult to predict the behavior of currency pairs in such conditions.
Monday morning is not the best time to start trading, as Friday's movements are corrected and weekend news are worked out.
To sum it up, the best time to trade is Tuesday through Thursday, which is not overloaded with news and speeches of monetary authorities.
In any case, you should use the rules of your trading system before making a decision and not give in to fleeting impulses of currency assets for fear of losing profits. Just in and just out are the rules when it comes to building up your capital, and without TS signals it is better to miss even the best time in forex trading than to get into the market and regret it for a long time afterwards.