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Best Forex Trading Times

So what are the best forex trading times? The forex market is open 24 hours a day during the business week, but this does not necessarily mean that all of those 24 hours are good for trading. There is a lot more activity on the foreign exchange markets at certain times of day and generally speaking, the best times to trade are when the markets are busiest.

The two biggest trading floors for forex are London and the US markets. Although the UK does not use the euro, most euro countries are within one hour time difference from the UK, as is Switzerland. US time zones also include Canadian. So the London session and the US session between them cover most of the major currencies that are traded.

The London session starts at 8.00 UTC and finishes at 16.00 UTC. The currencies that are most active during this session are the euro (EUR), British pound (GBP) and US dollar (USD) which is involved in the majority of all trades.

The US session starts at 13.00 UTC (8.00 EST) and finishes at 22.00 UTC (17.00 EST). The most traded currencies during these times are USD, EUR, GBP, AUD (Australian dollar), JPY (Japanese yen) and CAD (Canadian dollar).

The peak trading time, as you might expect, is during the three hours when these two sessions overlap and the markets are open in both London and New York. This period runs from 13.00 to 16.00 UTC (8.00 to 11.00 EST).

If you like to let your orders run over several days it may not make so much difference to you to know the busiest times on the markets. But if you are involved in day trading forex where you might open and close a trade within a few minutes, you will find most opportunities coming up during the most active hours.

If you are involved in a cross rate, i.e. a currency pair that does not involve the US dollar, you may have another window of time when the financial centers in your two countries are open for business.

For example if you were trading AUD/JPY you might find that trading was good during what is called the Asian session. The Australian and Japanese business hours are pretty close and on a day when activity was expected you might find some profitable trades during the overlap. However, generally speaking this is a slower session for just about all currencies.

So the best time for most forex traders is during that three hour window in the morning in the US and the afternoon in the UK and Europe, when the markets are open on both sides of the Atlantic. Trading can be frantic during those hours, there is maximum liquidity and the currencies move far and fast. A lot of the important financial news is released during this period too, especially toward the beginning. So these hours are the best forex trading times if you want to grab quick profits.

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Monday, December 27th, 2010 Introduction, Strategy No Comments

What Is A Forex Pip?

When you start to look around forex websites online, you will soon see references to the forex pip. Your gains and losses will be measured in pips. Something else that is measured in pips is the spread, the difference between the bid and ask prices which is the main cost of forex trading and how the brokers make their money. So it is clearly very important to understand what is a forex pip.

The word is an acronym standing for percentage in point (or sometimes, price interest point). It is the smallest increment of changes in values. It allows us to measure a rise or fall in currency values in percentage terms instead of in dollars and cents.

Why do we need to talk in pips? The reason for this is simple. In the foreign exchange market there is no world currency in which to express values. The US dollar may be the most commonly traded currency but it is not involved in all trades. If you are trading cross rates, i.e. two other currencies such as EUR/GBP or any other combination that does not involve USD, it would not make any sense at all to express your gains and losses in terms of US dollars. Instead, we need something that is a small percentage of the value of whatever currencies we are dealing with.

This means that the monetary value of a pip varies according to the currency.

Most currencies are quoted to four decimal points. For example you might see the bid price for EUR/USD quoted at 1.3642 and ask price 1.3644. The difference (the spread) is 0.0002 or 2 pips. Here a pip is 0.01% of a lot.

So if the lot size was $100,000, one pip would be worth $10. For a lot size of $10,000, one pip would be $1.

That is the value of pips when the US dollar is the quote currency, i.e. XXX/USD. But when the quote currency is different, one pip is usually 10 units of that currency (e.g. 10 euros or 10 pounds). Or if your lot size is 10,000 units, one pip is 1 unit (1 euro or 1 pound).

The exception is the Japanese yen which has a much lower unit value than most currencies (you get a lot of yen to the dollar). Because of this, the yen is only quoted to the second decimal point. You might see a price USD/JPY 110.15. In this case one pip is 0.01 or 1% but in yen, not dollars. So the pip value is JPY 1000 which at that price would be worth US $11.015.

These differences can be confusing when you are just starting out. So it is better for beginners to trade consistently with just one currency pair.

If you are trading one pair regularly every day you will soon get used to how much a pip means in terms of your actual gains and losses in your account. You will know how much one pip is worth in dollars or in your own currency.

But when you are trading several different currency pairs, you have to deal with pips of different value. If you get confused, you could be taking greater risks than you planned or closing trades with less profit than you thought. It is much easier to deal with only one pair at first until you have a sound understanding of trading practices and forex pip values.

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Thursday, June 18th, 2009 Glossary, Introduction No Comments

Forex Pairs: What Is The Best Currency Pair To Trade?

Forex pairs are always involved in currency trading. The pair is the two currencies involved in your trade. For example if you are exchanging US dollars for Swiss francs, the currency pair is USD/CHF.

Theoretically you could trade any two currencies of the world, but in practice most foreign exchange trading is limited to the currencies of the larger financial powers. This does not necessarily mean the biggest or most politically powerful countries. Switzerland for example is only a small country but is a major player in the financial markets because of the global importance of the Swiss banks.

There are 6 major forex pairs which between them account for 90% of the funds traded on the forex markets. These are:

- EUR/USD: the euro and US dollar.

- GBP/USD: the British pound and US dollar, nicknamed Cable because it used to be synchronized on both sides of the Atlantic by a cable running under the ocean.

- USD/JPY: the US dollar and Japanese yen.

- USD/CHF: the US dollar and Swiss franc.

- AUD/USD: the Australian dollar and US dollar.

- USD/CAD: the US dollar and Canadian dollar.

Some traders do get involved in other combinations of these major currencies or pairs that include other currencies such as the New Zealand dollar. But in the beginning it is best to stick with the majors.

The US dollar is the most significant single currency and is involved in 85% of trades according to a 2007 study. The euro is second at 37%. Next come the yen, pound, Swiss franc, AUD and CAD in that order. If you are wondering why these add up to more than 100%, it is because there are always two currencies in every trade.

What Is The Best Currency Pair For A Beginner?

If you are just starting out in forex, most experts advise beginning with the EUR/USD pair. This is because there is a lot of information about these currencies and the high liquidity results in a smaller spread, so your costs will be lower.

Some of the other currencies have particular characteristics which make most newbies avoid them unless they have special knowledge. For example the value of the Canadian dollar is strongly influenced by the price of oil because Canada is an oil exporter. The Japanese yen can also be affected by the price of oil in the opposite direction because Japan is a large consumer and importer of oil.

You will not want to get involved in a lot of different currencies when you are starting out. The best thing to do is probably to take the EUR/USD market and stay with that for the first few months at least. GBP/USD would be the second choice of the major forex pairs for most new traders.

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Thursday, June 4th, 2009 Strategy No Comments

What Is Forex Currency Trading In The Fx Market

What is currency trading? It is something that sounds quite simple and many people speak about it as if the meaning is obvious, but not everybody knows what it really is and how it works.

Currency trading is also known as forex trading. Forex (sometimes written FX) is short for foreign exchange.

You probably know that the value of each country’s currency goes up and down according to how well the country is doing compared with others. So for example, the value of the Canadian dollar against the US dollar will be higher or lower depending on reports of the Canadian and US economies. The same thing happens with all other currencies.

Currency values are constantly changing, so a trader can easily deal in them to make a profit. He or she can buy when a currency is worth less and sell when it is worth more, just as a stock trader would do.

The difference is that where stocks have only one value, their value on the stock exchange, a currency has different values compared with each of the other currencies. So for example the Canadian dollar might rise in relation to the US dollar but at the same time it could fall in relation to the Japanese Yen, if the Yen rose even higher.

Principles Of Currency Trading

Most forex market trading is margin trading. This means that instead of buying the whole value of the currency, you can invest in only a percentage. This allows a small deposit to control larger amounts. The principle of it is that a currency is very unlikely to change in value by more than a certain percentage of its value.

To simplify trading, currencies are traded in what is called pips, or price interest point system. These are the units of trading. They give a standard for comparison as the currency values change relative to each other. So you will hear traders talk of a currency gaining or falling by a certain number of pips, rather than talking in dollar terms.

How To Make A Profit With Currency Trading

In order to make a profit with currency trading, you need to have some idea of the likely movements of currencies. This knowledge can be gained by analyzing the markets or by applying a system that experienced traders have figured out from their own analysis.

If you are a beginner it is probably better to be receiving your information and analysis from somebody with more experience at first. You can pick up a lot of different systems online and watch how each one does, or you can work with an automated system. These are known as expert advisers or forex robots, and they will make the trades for you when the time is right according to the settings that you have programmed.

If you use an automated forex system you do not need to know what is currency trading in so much detail, although as with all things, the more you know the more success you are likely to have.

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Sunday, May 17th, 2009 Introduction No Comments