People want to know where the action is. If you are in the advertising sector, the chances are that you are trying to have your company advertised when the most eyeballs are around. Similarly, there is a good chance that you want to trade when there is the most liquidity, and the most dramatic news being released – whichever works for you.
The truth is that the liquidity really happens when markets overlap. This is where you have two separate financial centers constantly trading at the same time, as opposed to one. It’s easy to see that this means way more money flowing in and out of the market during these overlaps.
Unfortunately, this overlap doesn’t really work out that well. This is because it’s on the tail-end of the Asian market, and the beginning of the London market. Even though London is the forex capital of the world, it often takes a little time to truly “wake up”. This overlap might not have the liquidity that you need or desire.
London-New York Overlap
This is where things are truly wild, as the forex capital is open as the same time as the ever-bustling New York. Banks and multinational corporations are certainly involved during this session, and it provides a tremendous amount of liquidity. The dollar affects the markets tremendously, and news from U.S. and Canada can move markets more than usual. Sometimes, there is even later news coming out from Europe, which could create even MORE insanity!
The point is that the best times to trade are the busiest, because they can provide the most liquidity. One can take a look at a chart of average pip ranges of the days of the week when it comes to the London Session: Here, you see that there are all sorts of opportunities in the middle of the week, so this might be the best time to trade, being that it is the busiest.
If you dont want to build your schedule around the chart, get an expert advisor (automated trading system).
Of course, at the end of the day, you determine exactly how well you can trade. This is not to say that you control the global market by any means, but that even if you wake up in time for a certain session, it won’t matter if you are not at your best. If you are hungover, or didn’t get enough sleep – you certainly will not be able to think as clearly at all. This could lead to massive mistakes, which could mean that you lose money – which of course, you don’t want to do. Lifestyle is important, and the veteran trader understands that diet, exercise, and sleep can be essential to success. There is nothing wrong with having fun or partying, but keep in mind the forex market when you do so, so that you know that you are not missing out on any opportunities, or will be ready for the market when you need to be. Every trader is different – some are night owls, and some are morning people – so adjust accordingly, and be the best trader that you can be!
Okay, so let’s just point out where there might be the most opportunity. First and foremost, note the opening and closing hours of the market, and remember that the London session is typically the busiest session. Things tend to slow down during the middle of the week in general, as traders tend to wind down. Fridays usually means less liquidity than ever, and is probably a time to avoid, as the U.S. takes off for the weekend. Holidays are never a time to trade, because it’s one of the few times that forex traders TRULY get to take a break. Similarly, stay away from the market during major sports events, whether it’s the World Cup, Superbowl, or something where much of the world population is tuned into a single event. If you are trying to trade right after a major news event, whether it’s political, economic, or otherwise – watch out! This might be a terrible move and you might find yourself trapped on the wrong end of a trade that you didn’t expect. Major news events can cause volatile swings that you don’t expect, and it’s extremely hard to know exactly how the sessions will react to different news. Of course, this ALL depends on your strategy – you might be thinking weeks out rather than care about liquidity in the middle of the week, so your strategy certainly plays a role here as to when you should trade.