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When is the best time to start trading?

Here’s what you need to know.

forex screen with glasses
Image: Unsplash

Being a beginner in the Forex trade can sometimes be challenging. You barely know how to maneuver the industry and often end up making the wrong decisions. At times, you sacrifice your precious time trying to learn the different aspects of the trade; wondering how veterans in the industry have managed to succeed. You keep checking economic calendars without any concrete results.

Unfortunately, this may wear you out. Getting into forex trading takes patience. So, when is the right time to get into the business? Let’s break it down.

What to know before you start trading

The best time to trade forex is when the market is most active or when the trading spreads narrow down. At such a time, there is less cash in the hands of market makers and more money with the investors. There are 15 independent forex exchanges worldwide and each provides a window of trading at various times during the day. It is important to time these markets and enters into trades at the right moments.

Major foreign exchanges worldwide

There are four major forex exchanges worldwide. They are located in Singapore, Tokyo, London, and New york. These regions open their markets at different times. New York hosts the second-largest forex trading platform worldwide. The US dollar is involved in the majority of forex trading activities. Tokyo is the first Asian trade to open ahead of Hong Kong and Singapore. London continues to lead in the currency market and contributes to 34% of global trading.

Best time of the day to trade

A shrewd trader should trade across markets. There should be an overlap between the open markets to boost gains. More markets mean higher trading volume and volatility. In the forex world, the greater the volatility, the higher the chances of receiving gains.

Market volatility is never constant as it varies hourly, daily, weekly, and even monthly. Hence, as a forex trader, you need to know about and understand optimal levels. With this, you will see the difference and gain significant profits. The common trading times in the markets are:

  • US/ London- 8 am to 12 pm-   the most significant overlap occurs at this time. This is the best time to conduct trade as volatility is high. Besides, the Euro and dollar are the most popular currencies.
  • Sydney/Tokyo- 2 am to 4 a.m. – the currency pairs are EURO/JPY. Although not as profitable as the US/ London overlap, the return is good.
  • London/ Tokyo- 3 a.m. to 4 a.m. at this time, US traders are asleep. And, fewer activities are taking place at this time. You can watch when a large pip change occurs at the time.

Best days of the week to trade

When it comes to trading days, volatility varies between workdays and weekends. During the weekends and even on Monday, the market is not very active. Traders are reluctant to open new trades until they hear the economic news. Midweek, especially on Thursday, the trades yield the highest results. Wednesday has low volatility compared to Thursday and Friday. Lastly, many currencies start to overlap on Friday. The North American and pacific currencies drop on Friday.

Best months to trade

The market is usually active from January through May. These are great months to conduct trades. The market slows down in June, July, and August. This is the summer season, and most traders become inactive. August is the worst month to conduct trade as most institutional traders in Europe and North America go on vacation.

The market then picks up in September, October, and November, and during this time, you can get enormous profits. December is a good month, but, at the end of the month, the trading activities decrease at the beginning of the festive season. The market is low and maintains its status up to mid-January, and the cycle begins again.

Finally, before embarking on forex trading, always be cautious. Familiarize yourself with crucial trading strategies that successful traders use. The industry is sometimes harsh, and changes can occur in the snap of a finger.  When various economic, social, and political changes are taking place in a market, trading is nearly impossible. The above tips, however, give you a typical breakdown of the best times to begin forex trading.

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Chris has been blogging since the early days of the internet. He primarily focuses on topics related to tech, business, marketing, and pretty much anything else that revolves around tech. When he's not writing, you can find him noodling around on a guitar or cooking up a mean storm for friends and family.

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