Choosing the best time to trade for individual currency pairs
The FOREX market or the currency exchange market is very dynamic, it keeps changing every minute, and this market is operational 24 hours in a day. So the currency trader needs to keep track of all the market activities. But it becomes difficult for a trader to track the market and make an immediate transaction. Thus in currency trading time plays a crucial role in trading. To trade in currency timing and proper strategy based on the market activity is required, which in turn optimizes the trading opportunities during that time period. Trading currency pair depends upon the liquidity and other socio economic and geographical factors. Knowledge about the currency pairs timings, when the currency pair is in its highest range and when the currency pair is in its narrowest range. This information proves to be beneficial for the trader and thus trader can make investments wisely and strategically. Trading activities of different currency pair’s in different time zones, which reflect the trends of different currency pairs are as follows:
TOKYO (Asian Session) 7 P.M. – 4 P.M. EST: In Asia FOREX trading/Currency trading is conducted in the chief financial hubs. In the Asian trading session majority of the market share is taken by Tokyo which is followed by Singapore and Hong Kong. In Asian session there is a great influence of Japanese Central Bank but in spite of this Tokyo is among the strongest and crucial currency trading centre in Asia. As it is one the major trading centers in Asia, and a large proportion of traders, use this market dynamics as a standard to follow while trading currency pairs.
Currency pairs such as USD/JPY, GBP/JPY, and GBP/CHF are few good choices to be made in Asian session because these pairs offer wide range for the short term traders with average of 90 pips and provide an attractive profit to the traders. Big investors like banks and institutional investors when they enter the Japanese market; they make huge transactions of USD/JPY because they hold the assets which are dominated by dollar. The Japanese Central Bank have US treasury which is more than $800 billion and these treasuries plays a vital role in affecting supply of USD/JPY as well as the demand of USD/JPY currency pair via market operations. Even major exporters from Japan use the Tokyo trading hours to send back their earnings from different countries and thus causing fluctuation in that particular currency pair. In the anticipation of opening of the European session large investors and bankers start scaling and thus making favorable conditions for GBP/CHF and GBP/JPY currency pairs.
New York (US Session) – 8 A.M. – 5 P.M. EST: According to the statistical data and market survey, New York was found to be the second largest in foreign exchange market. And its financial activity slows down after the noon session. Maximum transactions are made from morning 8 am to the noon time in US Session. For the risk taking traders GBP/USD, USD/CHF, GBP/JPY are good choice of currency pairs. The trading activities within these currency pair are very high because these transactions directly involve US dollar. Few other currency pairs which offer high profits involving smaller amount of risk are USD/JPY, EUR/USD and USD/CAD. The high liquidity of these currency pairs allows the traders to either conveniently cut losses in the trade or secure handsome profit.
LONDON (European Session) – 2 A.M. – 12 P.M. EST: London is the most important and largest trading centre for currency exchange; it covers almost 30 percent of FOREX market. Major Banks dealing desks are located in London, and almost all the transactions are made in the European Session or London hours because of the high liquidity of the market during this time. GBP/JPY and GBP/CHF, these currency pairs have an average of almost 140 pips and therefore can be used to generate high profits in a short span of time. London hours are linked to both the US and Asian sessions. In the anticipation of the opening of the US market the big traders like banks and institutional investors need to convert their European assets to US dollar and because of this conversion activity there is high volatility in these currency pairs.