Welcome to another lesson, in this lesson we will discussed about the various timing when you can trade forex but before we can proceed I will suggest you read the following articles: What is Forex , Why Trade Forex, How Many is Made Trading the Forex Market, How to Read an Forex Quote, What is Pip, What is lot, What is leverage, What is Margin and if you have read them up, lets fire down to the lesson we have for today
This lesson will be classified into three (3) categories which reflect the category of traders: The Scalper, Intra-day and The Swinger (swing trader).
A scalper is a trader who trade frequently and hold his positions on the market for a shorter period of time.
An intra-day trader holds his positions for few hours, he may trade frequently or less but do not carry his open positions over to the next day.
A swinger is a trader who holds his positions for a longer period of time usually from days to weeks and trade less frequent than the scalper.
Also keep in mind that the lesson where we will talk about strategy will be at the ending of this class, I figured that it will be useful if everyone has the fundamental knowledge about forex before choosing a strategy.
Let’s look at different traders and how they trade:
The scalper Timing:
A good number of forex traders are scalper that is they enter into the market and exit as soon as they make a slight profit or loss.
A scalper is bothered about just two things in the market, which are the volatility and liquidity in the market. Since they trade more frequent that is they place more buy and sell order they need the market not to stay in the same spot but to move rapidly and also for their order to get filed almost immediately.
Let me explain further, a scalper sits on his trading desk with his computer ready to place an order in the market. He needs to be certain that the market will move in a fast pace (volatile market) and that he won’t get a requote so he need to get his order placed in the market at a good price (liquid market).
Intra-day Trader Timing
Unlike the scalper, his not too bothered about quick entries and exits. But he needs the movement in the market to be in his favour. That is to say, his more concern about volume in the market and the direction those volumes are moving the price. His need a volatile market and he isn’t too bothered about his orders not getting filled at that the price his intended, since he can sacrifice a few pips.
A swing trader has a nonchalant attitude toward the market, which include weather his order get filled at his desired price or the movement of the market moves in his direction at the first few hours or days of his order getting placed.
A swing trader usually uses the daily chart which summarizes all the activities on the chart to a single candle stick. He holds his positions on the market for a longer period in short; the swinger is almost immune to the challenges the scalper and intra-day trade faces on daily basics.
We have seen from the above explanation of various traders’ mode of trading now we will look into their timing.
The forex market is open 24/5 that is it is open for 24 hours for 5 working days but there are some hours the market is relatively calm and there are also days the market is very active so let’s know when these period are:
Frankfurt (Germany) – the Frankfurt market adds little liquidity in the market and is open from 7:00AM and closes 3:00PM.
London (Great Britain) – the London market adds lots of liquidity into the market and its opens 8:00 AM and closes 4:00PM.
New York (United State) – the New York market adds volatility and liquidity into the markets and its open 1:00PM and closes 9:00PM.
Sydney (Australia) –the Sydney market adds little liquidity into the market and opens 11:00PM and closes 7:00AM.
Tokyo (Japan) –the Tokyo market adds volatility and liquidity into the market opens at 12:00PM and closes at 8:00PM.
I know most of you might be confused but when we use the word MARKET, we are talking about the stock exchanges and other exchange houses that opens and closes at that time.
The Frankfurt market might include Deutsche Borse, SIX Swiss Exchange.
The London market might include the London Stock Exchange, the Euronet,
The New York market might include the New York Stock Exchange, NASDAQ, TMX group
The Sydney and Tokyo might include the Japan Exchange Group, Shanghai Stock Exchange, Hong Kong Stock Exchange, Shenxhen Stock Exchange, Australian Securities Exchange, Korea Exchange, Taiwan stock exchange.
I believe you can now see why the market is open 24 hours, that is, it is open for the whole day.
When is the right time to enter into the market?
For the scalpers and intra-day traders the best time to trade is during market session overlap such as the Frankfurt and London overlap, this period (9-10am) down to when market close there is enough liquidity and volatility.
The next best time to get into the market is 2-3pm, during this period the New York market is open, while the London market and the Frankfurt market is about to close for the day. As such the floor traders in London and Frankfurt are trying to process all available clients order for that day, while the New York traders are beginning to process their own clients order. This action makes the market liquid and volatile.
For those who can stay awake at night can trade the Sydney to Tokyo overlap from 1-2am at night.
In summary, we can see that the best time to trade as a scalper and intraday is using overlap because the market is liquid and volatile so you can get in and out almost immediately.
But for swing trader, this is not the case because you can get into the market at 10:00pm (this is the thinnest period in the market). Since swing trader hold their position for a longer period, they are immune to the ups and down in the market.
Remember that all the time here are in GMT+1.