The best hours to trade Forex

The highly volatile and dynamic market of currency trading is built on the price changes of currency pairs that are being traded. There can be any number of price changes oscillating from high to low and back within any given minute. The Forex market is volatile and busy due to the number of traders buying and selling currencies. Demand and supply is the same and rules regarding these apply in the same way as in any other market. An investor who wants profitable trades can start at the time the market is at its busiest. This means that the investor will be able to find either buyers or sellers for his currency trading.

One salient point about the Forex market is that you are always able to find a buyer or a seller for your currency trading needs. This is an aspect of currency trading that is a distinct advantage to traders. For one thing, you can trade at any time during the day or night as the market is open at one of the sessions around the world. This access to the market is one factor for its popularity among retail traders. Trading starts off in New Zealand and is followed closely by Australia, Asia, Middle East, Europe and finally America. Each of these market sessions has their own characteristics. Out of these sessions more than 50% of the trading is done during the European session and the American session. Therefore, a trader who wants to trade more profitably should concentrate on these two sessions.

The different sessions around the world at time overlap each other in trading hours. These overlapping time periods offer the most dynamic and profitable trades for the investor. Out of the overlapping time periods the best are when London and New York sessions overlap. This gives the investor the most dynamic and busiest time in the entire Forex market offering the best potential for profits.

As a trader or an investor in the foreign exchange market it is best to study the overlapping time periods and trade within them. A close study will reveal that the New York session overlaps the London session during 8:00 am and 12 Noon EST. Most big market moves originate during the London session and the time that overlaps the New York session.

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A Profitable Strategy for Trading the News

 Trading the news can only be done profitably if the news release in question triggers enough volatility in the currency pair affected by the news release.

Introduction:

Currency traders not only have to educate themselves on technical analysis but also they need to learn the fundamentals of fundamental analysis. This means that they should study over a period of several months the economic calendar and note the important economic events that occur on a monthly basis. They then need to observe the strength of the impact these events have on the currency trading pairs  and whether the impact has a positive or negative affect on their traded currency.

A Profitable Trading Strategy for Trading the News:

One of the news items that can have a major affect on the EUR/USD currency pair is the publication of the Retail Sales Report. In order to trade the report there needs to be enough deviation between the numbers expected and the numbers published. Historically the deviation that has the most effect on the EUR/USD currency pair is 20%.

If the retail sales number published is 20% worse than the consensus number then the dollar is impacted negatively so the strategy is to buy the Euro.

If the retail sales number published is 20% better than the consensus number then the dollar is impacted positively, so the strategy is to sell the Euro.

The strategy set up is as follows:

Check the economic calendar to see what the consensus number is for the retail sales. Decide on the percentage deviation that will activate a trade. Say the consensus number is 0.3% then a 0.1% change either up or down is sufficient to generate the volatility you require to trade.

Just before the retail sales number is published place a buy stop 15 pips above the current price of the EUR/USD currency pair. At the same time place a sell stop 15 pips below the current price of the EUR/USD currency pair. The 15 pip margin should take care of any slippage due to choppiness or extreme market noise. Also make sure you place your stop loss correctly. The best strategy is to place the stop loss on the buy side at the price of the sell order and the stop loss for the sell order should be the price of the buy order.

When the news is released you need to watch what the market does. If the market moves in the direction of your buy order then cancel your sell order and if it moves in the direction of your sell order than cancel your buy order. Exit the trade when the initial volatility has calmed down as it’s possible that the market could slip back to where it was before that news release.

This strategy is an excellent strategy for all news releases that have a strong effect on a currency pair. The only difference between the various news items is that you need to historically study the effect that the news items have on different currency pairs and what size of percentage deviation from the consensus number triggers a volatile market response either negatively or positively. The set up will be the same for any currency pair effected by the news item.

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