Are you thinking about becoming a forex trader? It’s easy to understand why investing in the fortunes of global currencies would appeal. After all, the latest triennial survey from the Bank for International Settlements shows that global trading is worth an average of $6.6 billion per day. This sort of volume highlights how liquid the market is – and, with it, comes a chance to make serious gains with the right strategy and approach.
What are your options when trading forex?
One factor that can have a major bearing on your own approach to trading forex is when you choose to trade. There are two things to consider as part of this too. The first is maybe not a surprise – the time of day you choose to execute your trades. After all, forex is a truly global market and can be impacted by developments on the other side of the world.
The second, though, is slightly different and is the ‘timeframe’ you choose to trade. With this, you’ll need to decide how long you want to hold a position for. For people new to CFD trading, the temptation can be to be really active traders within a short timeframe – making decisions using minute-by-minute data. In all honestly, however, a longer game can work out best.
Is there such a thing as ‘best’ times to trade?
The question of whether there is a ‘best’ time to trade is a matter for debate. After all, global forex trading almost never sleeps. By the time one market starts to close for the day, another one is opening up somewhere else. Sydney is one of four major exchanges – with Tokyo, New York, and London. As such, you may want to consider a time where two markets overlap.
Again, you have choice in this regard. But one argument is that – typically – the best time for trading is when the London and New York markets overlap. For Australian traders, that would be around 10pm through to 3am. Not the most sociable hours, maybe. But certainly, hours in which market volatility and liquidity are high due to the prevalence of the US Dollar in trades.
Keep up to date with the latest news releases
Of course, trading at a time when two markets overlap doesn’t necessarily guarantee it’ll be a profitable time. And it definitely won’t mean that any time outside that period will be fruitless. In fact, you can get a jump on other traders if you’re alert to big news events outside of those windows. Russia’s invasion of Ukraine, for example, started before the UK market opened.
So, when it comes to the best time to trade forex, there’s plenty to consider. It’s about trading at the most opportune time to take advantage of market liquidity. But it’s also about keeping a watch on global news events. And there’s always the question about what sort of waiting game you’re prepared to play. Short bursts of trades can work, but so too can longer-held positions.
In that regard, look at the 1- and 5-minute charts. But don’t ignore the daily or weekly charts. Find the strategy that works best for you – and give yourself the best chance of success.
