The Forex market offers investors many advantages over other financial fields. These include a high potential for profitability, a flexible trading location, the ability to capitalize on a bullish and bearish market, and the availability of a broad Forex market schedule available from Tokyo to New York.
While Forex market hours are not limited to one time slot or another, and forex investors can actually open positions almost anytime they want, there are certain Forex market hours that are optimal for investment.
One of the clearest features of the foreign exchange market is volatility. What this means is that the market is always moving and moving fast. This has direct consequences for the currency merchant who seeks to make money. All an operator has to do is be in the right place at the right time and in the market can shoot in any direction, which will result in significant benefits. This, however, depends a lot on Forex trading hours.
Another aspect of large Forex trading is that you can benefit if the market goes up or down, but if the market doesn’t move at all, then obviously there will be no profits. For this reason, the hours of the currency market are so crucial.
If you open a position, when there is a limited movement in the market, the volatility will be minimal and, consequently, so will your earnings. However, if you open a position in the Forex trading hours that are occupied, the volatility will be, and as you may have guessed, so will your winnings.
Of course, like everything in life, the greater the risk, the greater the reward. In this case, the greater the reward, the greater the risk. Are you confused, sir? What I mean is, yes, if there’s high volatility, you can make more money, but you can also lose it quickly if the market moves against you.
To better understand the best hours of the foreign exchange market for trading, let’s first talk about the best and worst days for trading. It has been proven time and again that the foreign exchange market is the most active in the middle of the week. This is true of all major pairs
When exchange operations, the weekend starts early and the market is only occupied by half the average Friday and then calms down once it is 24:00 CEST. The market closes at 17:00 EST. Holidays, weekends, and days with the most important news are some examples of the currency market hours you want to avoid.
Buying the Jumps
As for the real trading hours of the currency, there are three trading sessions in the currency market, the Tokyo session (7 pm-04 am EST), the London session (03 am-12 pm EST), and the U.S. session (8 am-5 pm EST). The premise is simple. You need to find moments where several sessions overlap so it is the maximum activity in the market.
Yes, we will speak for you, the time slots in which the currency market time of several overlapping sessions are as follows:
- 3-4 am EST: Tokyo and London are open
- 8-12 pm EST: London and U.S. are open
Of course, this does not mean that you should not operate beyond these time slots, but these specific time frames could produce greater volatility and profits for the average merchant of your forex investment. Certain times of the day hold more volatility than others,and certain days of the week are more or less volatile on average. Long-term changes in volatility also affect how currency traders approach the market, and thus also the strategies employed.
In the stock market, many people think that volatility is a negative thing because usually increases as the stock market falls. In the currency, volatility is simply the amount a pair moves. Volatility can be monitored by minute, hour, day, week, or longer time frames.
If one coin is going up, that means the other currency of the pair is falling. For example, if EUR/USD is going up, the euro is going up in value and the US dollar is going down in value. Therefore, volatility does not have the bias it has in the stock market. Volatility may increase or decrease during both upward and downward trends in a currency pair, on an interchangeable basis. Volatility trends and changes in volatility tell us a lot about how we should negotiate.
How price volatility tends to be higher or lower at different times of the day, depending on the type of currency. For example, the Japanese yen during trading hours in Japan, but the volume of the currency grows during trading hours in London and New York. Hourly volatility is more relevant for short-term currency traders, but it is not an important factor for Forex traders. The various global trade sessions affect volatility within the 24-hour period.
A currency pair is typically more volatile when one or two of the markets associated with it are open for business. For example, EUR/USD is more volatile and active when London and/or New York are open because these markets are associated with EUR (euro) and USD (US dollar).
Between 13:00 and 17:00, when London and New York are open, EUR/USD experiences the greatest volatility. Trade trends are very likely to offer better results for day traders during the most volatile hours of the day, while more variable-type strategies work best when volatility is lower and the major markets associated with the pair are not open to drive it.
The volatility is changing over time, affecting the amount of pips that a currency pair usually moves during certain times of the day. The 12th hour may increase to see 40 pips of movement or fall to only 19 pips, but it is usually the most volatile hour of the day. Therefore, hourly trends do not change much, but the movements of the pips that can be seen during those hours change constantly.
Volatility According to the Day of the Week
Trading a certain pair you can find your target of 50 pip is easy to hit on Thursday, but it is hard to make 30 pips on a Monday. Each pair has different day-of-the-week trends; some days have half the volatility of others. You should not negotiate every day in exactly the same way, you may find a better or worse performance pattern on certain days.
If you look at the average volatility in the last 100 days, for example, each day of the week will have its own average. Adjust the expectations according to the day of the week. For example, over a period of 20 weeks for the EUR/USD a day trader could expect to do much more (due to larger movements and more opportunities) from Monday to Thursday, which could be expected to do on Friday or especially on Sunday. Expectations also need to be tempered on Monday, compared to a Wednesday.
Volatility Over the Long Term
The amount that the pair has moved on average, per day, in recent years tells us a lot about the current market conditions, how much we should be negotiating, and even what is likely to happen to the pair in the future.
When volatility is close to several years there are far fewer trading opportunities. Traders trading during the day and traders trading in the short term should be more restricted in the way they trade. Commissions and spread (difference between the offer price and purchase price) affect commerce much more when a pair moves only 40 pips a day, compared to when it moves 120 pips a day. The cost of trade is the same, but the potential reward for that cost is lower (however, this is not a direct relationship).
Abrupt changes in volatility often accompany a change of trend; this is because trends are often complacent and you can see volatility in decline. The status quo is shaken and traders are forced to abandon their operations quickly or face heavy losses.
Volatility is more complicated than currency pair moves each day on average. By reducing to zero, we see that volatility varies dramatically and consistently, through different times of the day, days of the week, and in time. Adapt and monitor these changes. Be aware of how volatility is quantified and constantly monitored so you can adjust your expectations accordingly.
Trading Methods Adjusted to Volatility
A fixed strategy, such as taking the risk of losing 20 pips in order to earn 60 may sometimes work in the market, but not in others. Consider using an indicator as the true range average, or controlling the volatility of currency pairs on a regular basis to set the right stop loss and target levels for current volatility. Sometimes you can risk 10 pips to make 30 with a larger position size, and as volatility increases, you reduce the size of your position and risk 30 pips to make 90 (just as an example).
Volatility is more complicated than currency pair moves each day on average. By reducing to zero, we see that volatility varies dramatically and consistently, through different times of the day, days of the week, and in time. Adapt and monitor these changes. Be aware of how volatility can be measured and monitored constantly so you can adjust your expectations accordingly.