The forex market includes the foreign currency market and the Euro-Forex market. The international forex market is virtual. Foreign forex markets do not have a central physical location. It exists in the dealing rooms of various central banks, large global banks and some large corporations. Dealing rooms are connected by telephone, computer and fax. Some countries co-locate their dealing rooms in one centre. Euro-Foreign money market where forex is borrowed and lent. The interest rates of various currencies are fixed in this market.
In foreign exchange market, you pay no commission and no option fee. Because you deal instantly with the market maker through purely digital online exchanges, you eliminate both ticketing costs and intermediary brokerage fees. There is still a cost to initiate a trade, but that cost is reflected in the bid/ask opening that is also present in futures or equity trading. However, trading through our buy and sell stations offers tight consistent spreads.
By far the best time to trade the foreign exchange market is when it is most active and subsequently trading in the most significant volume. A faster currency market means more opportunities for prices to strike up or down. A slow market means you may be wasting your time – turn off your computer and go fishing!
The highest volume of foreign currency transactions occurs during London hours, followed by New York hours and Tokyo hours. London is subsequently the center of the foreign currency trading universe.
What does this mean to us as a typical forex dealer and is there a best time to trade our chosen currency pair?
Sure! To begin with we must look at overlapping buying and selling periods.
The forex market opens with Japanese traders between 8pm and 4pm EST. London traders start their day at 3:00 am EST and end at 11:00 am EST. Traders in New York open at 8:00 AM and close at 4:00 PM EST.
If we are buying and selling EUR/USD, USD/GPB foreign money pairs then we should see when the trading time for these pairs overlap. Due to this fact, one of the best times to trade the forex pair: EUR/USD and USD/GPB is between 7:00 am and 11:00 am EST when these two currency markets are most active. (ie when they are overlapping).
Forex trading is a zero sum game and as traders we must strive to achieve everything we can to gain an advantage over our competitors and swing the opportunities in our favor. Choosing one of the best times to trade the currency pair we have now chosen is one of the things under our management that can be done simply.
Another thing that forex day traders should pay attention to regarding the best time to trade is that Mondays and Fridays are generally bad days for trading. Why is this?
Empirical research suggests that Monday buy-sells are usually temporary as the market attempts to take cautious steps to confirm or establish a trend. As Fridays are also bad days, a large number of transactions are closed on that day.
The best time to trade the currency pair of your choice is when trading is most active in that particular currency. The perfect days to trade the forex market are probably extra between Tuesday and Thursday. Good luck with your buying and selling!