Traders must remember, basically as there is a time to sleep and a period to work, when trading there are specific times when you should trade your favorite currency pairs.
The forex market is open 24h a day, Monday to Friday, and is specifically more active during the opening and closing of banking companies around the globe.
Although this is an advantage, it does not mean that the same conditions and opportunities are offered to investors during all 24 hours of the day. It is clear that the volume and volatility of the foreign exchange marketplace will be very different when let’s say from the biggest markets, only Japan and Australia are open at a special time.
To find the most busy and lucrative period is one of the most important problems traders are faced with. Let’s look more carefully at this issue:
The Period 12:00 - 15:00 GMT
It is generally agreed that the period between 12 hours and 15 GMT are the most active times for investors who wish to take benefit of greater market volatility. New York markets open at 12 GMT, while London markets close at 15 hours and amongst these two times the greatest liquidity is seen.
While this is true, it is necessary to know that the opening and closing of markets is much more smooth and is not strictly not restricted to those three hours. London and New York are two very important financial centers. However, banks open and close throughout the United States and Europe also during the day.
Choosing a Time Period Depending on Your Trading Profile
The best time for a trader is also related to his trading style and choice of strategy. The 12/15h period mentioned above, is courted by the “day traders”, speculators and those who use short-term methods to take advantage of short-term fluctuations and diverse day events (economic events).
‘Swing’ traders however want a low volatility environment, so that the most suitable timeframe for these style of traders is after the closing of the London market, about 15 hours. Furthermore, if you are strategy is based on weekly or monthly trends, the choice of trading period will be of little importance to you.
This article was not made to be a comprehensive guide to all matters relating to the choice of the ideal trading time, but with a better understanding, it may be possible to develop your knowledge in this subject and better choose among the numerous different strategies, offered for traders. Having said that the points stated here can give you an idea of the issues and the importance of an pertinent choice of trading time.
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