Knowing when to enter the market is crucial to exercising a
good technical trading strategy. There
are many pitfalls that inexperienced traders experience because they are
entering the market when the probability for making a successful trade is
reduced. So when is the best time to
look for a trade and why?
The best time to look for a trade is when there is heavy
volume in the currency markets. Since
the Forex market is open 24 hours per day, it’s best to find the times when
multiple countries markets are trading at the same time. Every Forex market in the world operates from
8 a.m. to 4 p.m. in their respective time zones. In order to take advantage of the chance of
many trades developing, one needs to look at when the Forex market times in
different countries overlap. In the overlapping
times when multiple markets are open, generally there is the most volume and
pip movement.
For instance, it is best to trade the EUR/USD, USD/CHF, or
GBP/USD between 8am EST and 12pm EST because the US market is just opening at 8am
EST while the European market is finishing up for the day. Another good time to
trade is in the middle of the night from 1am EST to 3am EST as many trades
develop as the Asian markets are closing and the European markets are
opening. The Australian and Asian
Markets overlap between 7pm and 10pm EST as well which offer good
opportunities. Generally speaking, one
can just shut off their computer and not bother looking for trades from 4pm-6pm
EST as the US markets close and there are no overlapping markets in those
times, so although there may be profitable trades one could enter, the volume
is much lower and it is far less likely great trades will develop. The Canadian market does not play a big role
in affecting the markets so just trade along with the US market times
when the European, Asian, or Australian markets are open.
Many currency pairs tend to trend in the same direction
(parallel) or opposite directions (inversely). Traders can use this information to plan to
trade more than one pair knowing that they have a high probability of moving in
the same or inverse direction.
The general rule is that these pairs listed below tend to
trend in parallel relationships. The Euro
and Cable tend to move together the most.
EUR/USD and
GBP/USD
USD/CHF
and USD/JPY
AUD/USD
and NZQ/USD
And, these pairs below tend to move inversely the most. The Euro and the Swissy tend to move
inversely the most.
EUR/USD and
USD/CHF
GBP/USD
and USD/JPY
AUD/USD
and USD/CAD
Lastly, remember that when trading, Bulls and Bears make
money, but pigs get slaughtered. Don’t
be too greedy. Trade with proper equity
management and never risk more than 2% of your trading account on a single trade. Look for 10%-30% pip gains and move on to the
next trades. Building small consistent
profits will add up to large long-term gains.
Trade during times when markets overlap, and use information on parallel
and inverse relationships to determine whether or not to enter on trades on
multiple currency pairs at the same time.
Wishing You Success!
David Molina
If you are interested in
furthering your FOREX education and want to get a FREE e-book “Forex Freedom",
please visit: http://www.fxtradingmentor.com
