One of the hyped facts about the forex trading by the brokers is the market hours. The currency market is publicized as 24 hour market. Many novice traders jump into the market with an imagination of earning more than other markets due to increased time they can spend in the market. But new traders should understand the fallacy behind this logic. You should know the significance of forex market hours for profitable trading.
The Three Sessions of Forex Trading
Forex market hours are divided into three sessions. The three sessions are called Asian, European and US sessions. The names are given according to the peak activity of particular region. During the Asian session, the Asian markets are very active. European and US session follow the similar pattern. Each session overlaps with the next session meaning that during this period two sessions are active at the same time. As more people trade during the overlap time, volume increases during such time. Local currency is traded predominantly during each session. For example in the Asian session, Australian dollar, New Zealand dollar and Japanese Yen see increased activity than other times.
Lack of Market Activity
The forex market hours start in Sydney on Sunday evening or night depending on where you live. It closes on Friday when New York closes. So it is open 24 hours. But you should understand how it will benefit you as a trader. Despite it is open 24 hours, you can see minimum activity during certain time of the day. The time between US close and Asia open is normally calm. The liquidity dries up. Market moves mostly because of the trades facilitated by the businesses and not the traders. Take a look at strategy that depend much on pinpointing the exact time to open and close long term position in swing trading system.
High Spread
The cost of the trade should be less especially if you are a scalper. During this time the spread is high. You have to pay the spread of 4-5 pips even on major pairs like EUR/USD. The high spread also acts as a false signal to trade. If you have placed a pending order to buy, it might get triggered due to high spread. In normal market conditions such order may not be fulfilled saving you from the losing trade. So you have to be careful. You can trade the market anytime but you should not. Having a fixed spread broker may help at this point. Go through Ava FX review for recommended fixed spread broker.
Market with Low Volume
As a trader you may want to trade during the most active forex market hours. During this time, the volume picks up. You can easily make money in high volatility market. High volatility times are towards the end of Asian session and entire European and US session. At other times there are subdued moves. So you will have to wait patiently till the volatility increases.
It is the fact that forex market is open 24 hours. But forex market hours should not be the reason why you should trade the forex. The nuances of the market should be carefully understood. You will know these details as you spend time in the market. So it is advisable not to trade with real money until you know the stuff completely. So the best way is to trade virtually till you get comfortable. Whether you’re still learning and need a demo account or a professional trader need better service, I recommend you read another look at HotForex brokerage for top recommended broker.
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Posted under Currency Trading
This post was written by admin on January 28, 2012
