When it comes to trading, timing is everything. For most traders, the question of “when” is just as important as “how.” The Forex market is available 24 hours, five days a week, but are there any specific timeframes you need to follow to trade?
Let’s review this question.
Indeed, the Forex market is available 24/5, yet there are specific timeframes. Even if Forex is decentralised, prices depend heavily on central banks and their schedule.
There are four main sessions divided by region: European, American, Asian, and Pacific. During a session, central banks and other financial institutions of that same region are active, which causes assets movements.
During the European session, there is a significant probability of high volatility for European currencies. Once it overlaps with the American one, the volatility reaches its peak, which can be profitable for you depending on your trading strategy.
It’s essential to mind the time zone of your country, so don’t forget that before you plan your trading day.
When it comes to the days of the week, it’s determined that most volatility and trading volume can be observed on Tuesday and Wednesday. However, by Friday evening, the market activity ceases - the expert note that it usually happens after 5 PM GMT.
Trade with caution
You must mind not only the most convenient days and timeframes for trading but also periods that would imply a significant amount of risk.
Friday. It’s incredibly difficult to predict the price movements that day. Despite many traders leaving their orders open while waiting for a more beneficial opportunity to close them, some traders prefer entering the market for short-term trading to make quick money. That causes unpredictable volatility that may result in losses, so be cautious of Fridays.
Holidays. During major holidays. Central banks are closed, and there is not much price movement. Placing an order during holidays is considered ineffective since there is not much possibility to earn. Pro tip: don’t forget to check major holidays in different countries.
Major news. News trading can be more difficult for understanding the market and its analysis. It is recommended to refrain from trading during big releases and closely monitor the market to find the opportunity to place an order or close an already existing one.
Time management is crucial for any trader. Most of us can’t spend every minute in front of the monitor and follow a hundred charts. That’s why you need to work smartly, not hard. Define the key trading sessions you are most interested in, map out the days it would be unfavourable to trade and focus on the critical timeframes that suit your trading strategy.