The three best (and worst) times to trade forex
The forex market is wide and offers great opportunities to anyone with a solid trading strategy and plan. Where and when you work is up to you and with a well disciplined approach, market success is attainable.
But although the market offers much flexibility when it comes to trading times, it’s not always a good idea to enter or exit the market. Certain events, days of the week, or changes to your mental state, can raise serious red flags over the viability of the market at any given moment.
While deciding when to trade is ultimately up to you and scheduled according to your own unique personality and skill set, there are consistently better times to invest. However, these prime times do not always coincide with what fits your trading plan.
If they clash with your trading plan, don’t rush to change your schedule but rather consider reworking your plan to incorporate some time tested prime periods.
Your Brain is Firing on all Cylinders
This one might actually be best approached from the other side – don’t trade when you’re mental state is not fully functional.
Even the best, most disciplined traders have bad days. No matter how prepared or healthy you are, there are going to be days when you just don’t have it.
On days like these, don’t trade.
There is no golden rule that says you need to trade every day. It’s always better to miss some action than make bad trades because your brain is a bit foggy and you can’t perform properly. If you’re in a losing streak, just take a break.
In order to not lose the habit of your work, try understanding why your mental state is the way it is. Pinpoint the cause or causes of your block and work backwards to alleviate it.
Trade During the Middle of the Week
As people come off of their weekends, into the new trading week, the market usually reflects the sluggish pace with which people head into the work week.
The market is usually firing on all cylinders 24 hours after the new week has begun.
During this time, the market is working out which direction it will head in as investors re-focus their attention to trading.
The market is in full swing, prime time Tuesday – Thursday.
Like Monday, be also aware of trading conditions on Friday. There tends to be lower liquidity at the end of the week and trading on Friday runs the risk of being caught on the wrong side of a Monday gap.
Many traders find it very tough to open a trade at the end of the week only to sit by for 48 hours and watch that trade go in any direction without having control over it.
In Periods of Calm or Quiet
This one’s tough to judge because we can’t always know when a big news story or event is about to break.
Other than scheduled rate increases or decreases, volatile events are impossible to predict. This means it’s easier to tell you not to trade after such an event but harder to say not to trade before.
While trading in volatility has the potential to make tons of cash, it also has the potential to go deeply against you. When an event has a random outcome, we can’t judge whether the trades made during it will go in our favor or against us.
If we’re price action traders, our skill and proficiency in the market comes from reading market generated signals over a long period of time by accumulated daily charts. This trading edge doesn’t exist when we try to trade via the news.
News generates random events that buck the conventional wisdom of our preferred daily charts and long time period assessments.
The best time to trade in the wake of a volatile market is when the session closes at 5 pm EST.
Let things settle down and then feel comfortable getting back in.
Training yourself and learning when is best to trade for yourself is a key component of becoming a successful trader. While the thoughts laid out above are general, it’s up to you to determine what times are the best for your unique trading personality and setup. What works for some doesn’t work for others and crafting the right routine takes time and a lot of effort.