Time-management at Forex market
The choice of a strategy and timeframe, as well as experience of a trader is essential for trading; however, it is also important to select the correct time period for every currency pair. There are four trading sessions at Forex: Pacific, Asian, European and American.
Description of the trading sessions
The Asian session starts the first, at 0.00 GMT (03:00 Moscow time). Major market participants of this session are traders from Singapore, Japan, China, Hong Kong and Russia. It is not very convenient to trade at this time of the day for Russian traders, as they have to stay up all night. It is interesting that special strategies have been developed for trading at the Asian session. One of the most known of them is a strategy called “Insomnia”. At the Asian session trading is usually sluggish. The only currency, which can attract investors here, is the Yen. However, high volatility in the currency pairs USD/JPY and EUR/JPY usually takes place during the other time periods. There are two important things about the Asian session, which shall be known by a trader:
- News releases from 3.00 am;
- Actions of the Bank of China, which may buy either USD or Euro. Usually, China purchases Euro, as the country receives American dollars from selling its products. Therefore, if it does not happen, market will experience uncertainty.
The European trading session, starts at 9.00 am. Usually, market is very active at this time, as investors can work out the news and the data released during the night. The time from 9.00 to 13.00 is the effective period. Pay special attention to the period from 12-14, as at this time both, general news from Eurozone and the data on some European countries usually become known. After that, British news is released, which sometimes are published until 16.00.
The American session, which is considered as the most aggressive, starts at 16.00. The first news may be published as early as 16.30. Within the few hours, when the market makes use of all the statistics, the market is very active, later activity is waning. The exception is period when the meeting of the US Fed is taking place. Market is usually waiting for the outcome of the meetings and in this case, movement in the currency pairs can be very volatile at 22.15.
Basic rules of time management
Trading in the currency market continues 24 hours a day. This fact gives a false impression that you can earn money at any time. However, traders’ activity is different depending on the trading session and on the time period. Basic premise of time management, which is taken into account by all experts in the market, is to trade when the price movement is the most volatile. The periods of the highest price activity are:
- Overlap of trading sessions;
- Periods of the news releases and publications of the financial data;
- Actions by the large market participants (for example, the Bank of China).
From 11 to 12 Moscow time, is the time period of the Asian and European trading sessions; from 16 to 20 Moscow time, is the time period of the European and American sessions. These hours can be the most efficient for traders. And, when choosing between the first and the second options, we would advise you to choose the latter one.
On the one hand, the time when the main news is released, can be very favourable for gaining profit, as volatility in the pairs is increasing; on the other hand, risks are also increasing. The reason of the increase in risk is uncertainty, when it is not clear whether the market will welcome the news or not. For scalpers and experts of the technical analysis it is advisable to close all trades for this time period. However, for those who trade on the news, it is the best time for opening positions.
At the time periods when large investors enter the market, it is advisable to refrain from making transactions, because their actions are unpredictable. Of course, with the exception of cases when traders know in advance what large investor’s actions will be. As an example, we can recall the situation when shares have been purchased during the crisis of 2007-2008. At this time many traders were able to earn big money.
The best and worst days for trading
It is considered that the worst days for trading are public holidays when the world's major banks are closed. Activity in the market is very low, and prices move in the narrow sideways. A trader may not trade on Friday, as it is almost impossible to predict price movement at this time. Some traders do not recommend to start trading early Monday morning, when major news of the weekend is taken into account. The price is affected by plenty fundamental factors, which some of the investors may fail to consider.