TIME TO TRADE ~ reuters news forex trading
To determine what to trade is a matter of choice. I chose to trade mostly GBPUSD and GBPJPY because where my time zone is 1 hour ahead of GMT and the two currencies moves well on most days in terms of number of pips. Most experience traders advocate starting with one pair and adding others as you gather experience. This is very true. However, the rules of the charts apply to any pair. To determine when to trade, you need to understand trading times in various market. For example GBB pairs move best when London session is open, JPY pairs move best during the Asian session and USD pairs move most during US session.
Forex trading day begins at 6:00 PM Eastern U.S. When it is 5:00 PM on Sunday in New York, it is Monday morning in places like Australia and New Zealand. Overall, volume is low at this time of day because the three biggest Forex volume centers – Great Britain, the United States and Japan – are mostly inactive at this time. However, the Australian dollar and the New Zealand dollar (also known as the “Kiwi”) may see some price activity during these hours.
A few hours later, around 7:00 PM Eastern U.S. time, Japan awakens and the Forex markets begin to stir. Japan is the third largest Forex trading center, and comprises about 10% of all Forex trading volume, as many major banks have offices in Tokyo. The Japanese Yen is particularly active at this time, especially vs. the Euro, the U.S. dollar, and the Great Britain pound. Most of the volume occurs during the early part of the Japanese session, and the liquidity lessens considerably as the trading day continues.
As the Japanese trading day winds down around 3:00 AM Eastern U.S. time, European markets open for business, and the London trading day begins soon afterward. Great Britain is by far the most important and influential Forex trading market in the world. The dealing desks for many of the world’s major banks are run from London, and the market is responsible for roughly 30% of all spot forex volume. London tends to be the most orderly forex market due to its tremendous liquidity.
About midway through the London trading session, U.S. Forex traders come to life. New York is the second most important market in Forex trading. New York trading is very liquid and accounts for about 20% of the world’s total forex volume. Trading is especially active early in the New York session, as the London session is still ongoing. U.S. Economic news releases often occur early in the New York session, and can cause a tremendous amount of volatility.
Trading often becomes choppy after midday in New York as the London market winds down, and liquidity and volatility begin to dissipate. By mid to late afternoon New York time, London traders have gone home for the day, and it is late at night in Japan. New York traders, while still active at this time of day, have already finished with the bulk of their trading. Friday afternoons in the U.S. are generally the least active, because for much of the trading world, it is already Saturday. Finally, as the U.S. markets close, a new trading day is just about to begin in the western Pacific, as the Australian and New Zealand markets begin to stir, starting the process once again. The cycle continues all week, with most dealing desks closed from Friday afternoon until Sunday afternoon, when trading resumes.
Once you have an understanding of this cycle, it will assist you in planning your trades and only trade during the most effective periods.
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