Many novice forex traders immediately began trading. They obsessively follow different economic calendars and trade right after every data point is released, seeing the 24-hour, five-day-a-week foreign currency market as a convenient way to trade all day.
This approach not only swiftly depletes a trader's resources, but it may also exhaust even the most tenacious trader. The forex market operates on the regular business hours of four different parts of the world and their respective time zones, as opposed to Wall Street, which follows regular business hours. As a result, trading takes place day and night.
The Forex Markets Hours of Operation
First, here is a brief overview of the four markets (hours in Eastern Standard Time, or EST):
According to "Day Trading the Currency Markets" (2006) by Kathy Lien, New York (open 8 a.m. to 5 p.m.) is the second-largest FX platform in the world and is closely followed by overseas investors because 90% of all trades involve the U.S. dollar.
Changes on the New York Stock Exchange (NYSE) can have a direct, strong impact on the value of the dollar. The value of the dollar can change immediately when mergers and acquisitions are completed.
The first Asian trading hub to open, Tokyo, Japan (open 7 p.m. to 4 a.m.), accounts for the majority of Asian trade, barely ahead of Hong Kong and Singapore.
The currency pairs that typically have a fair amount of action are USD/JPY (or U.S. dollar vs. Japanese yen), GBP/USD (British pound vs. U.S. Dollar), and GBP/JPY (British pound vs. Japanese yen).
The USD/JPY is an especially good pair to watch when the Tokyo market is the only one open, because of the heavy influence the Bank of Japan (Japan's central bank) has over the market.
The trading day starts at 5 p.m. Sydney time, Australia (open until 2 a.m.). Even though it is the smallest of the mega-markets, it has a lot of initial activity when the markets open up again on Sunday afternoon because individual traders and financial institutions are attempting to reorganize after the extended break since Friday afternoon.
London, United Kingdom (open from 3 a.m. to noon): London is the core of the United Kingdom (U.K.), which controls the majority of the world's currency markets. According to a BIS analysis, London, one of the world's major trading centers, is responsible for about 43% of all international trade.
The Bank of England, which supervises the monetary policy of the GBP and sets interest rates, has its headquarters in London, therefore the city also has a significant impact on currency movements.
London is frequently the starting point of forex trends, which is important information for technical traders to remember. Technical trading uses statistical patterns, momentum, and price movement research to find opportunities.
The Best Hours for Forex Trading
Now let's talk about trading forex markets during good times and bad times.
The best time to trade the forex market is usually in April and May when the US Federal Reserve releases its monetary policy statement (MPS) every fortnight. For example, if you buy a $100 note at an average of 0.75%, this will be equivalent to buying 1.25% more units than normal, assuming that your deposit remains constant, at 85.65%.
However, if the Fed does not release an MPS until September 14, then you can make an offer for it from July 15 to 20. You should wait until September 29 and October 6 so that there are no changes in government policy before making such an offer. This makes it easier to avoid sudden price swings.
After that date, all prices will remain stable while also avoiding the risk of falling back on overnight lows, which can lead to higher losses or even panic. This is why it is important to keep away from “pump-and-dumps” or short selling when using leverage. And to do so, one must understand what these terms mean.
A very basic definition of pump-and-dumps and other forms of short selling involves taking a position where they expect a sharp fall in the value of a currency and then betting against it by placing a large amount of money in the market with the expectation that this value will depreciate.
This means that whenever the value of a currency falls below its previous high or becomes less than a certain level for a particular period, the trader loses their entire investment.
It is important to follow the rules when entering or exiting the short market. These include paying attention to price charts, being aware of what happened in the past and what might happen in the future, analyzing historical tendencies for the key pairs, and always checking whether the exchange rate is favorable for any buyer or seller.
Also avoid making big bets at once—if your initial position drops down to less than 30 pips from its peak, take only a few pips instead. That way, you avoid creating huge positions that will become difficult to close.
The main thing to remember here is that the currencies of most major economies have changed over the years, but these changes rarely impact daily stock prices in a significant way. If anything, over the last few months, traders have been piling into smaller currencies while taking profits on bigger ones.
We have discussed how to handle this situation. But in a nutshell, we can say that as long as one uses well-managed technical indicators, they can stay profitable despite all the recent developments.
The above explanations should help you understand the ins and outs of understanding the forex market without having too much trouble. It is worth noting that some factors could affect the overall performance of the FX market. A good example is political change.
If things in the country have gone downhill over the decades, chances are that a currency will depreciate too. Thus, you need to be ready for fluctuations that could occur in both direction and strength.
Forex trading takes place at fixed times of day; therefore, different locations or geographical areas could affect the execution process of a transaction.
As mentioned earlier, many people rely heavily upon global financial news sites to pick the right currency and get the right trade. Still, others prefer to use simple instruments like spreadsheets or online services. There are several ways to start doing this:
First - find a broker who specializes in trading instruments such as futures, spot, options and indices.
Secondly - check out popular trading platforms like Robinhood or Apex Trading.
Third - use specialized educational resources available on YouTube, Facebook and Twitter; fourth, set up a Google alert to listen for the U.S.
Federal Reserve’s quarterly meetings and press releases. Finally, try to develop an emotional connection with your customers. Be empathetic, show them how they can profit from their trades, and remind them of those great days when trading has never been so lucrative.