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Find out about the best times to trade forex

Many traders believe that Forex markets are prone to behave differently at the beginning or end of a calendar month. It’s because large investment institutions often decide to change investments. If this belief is accurate, we should expect to see evidence that trend reversals and relatively higher volatility have been more likely in the month’s changes.

Historical tests show that the volatility of the major currency pairs has not tended to be higher at the beginning or end of a calendar month than at other times of the month.

What about trend reversals? 

In general, trend outbreaks at the beginning of a new calendar month appear to have been more likely to fail than outbreaks at other times.

Trend traders should keep in mind that for them, the beginning or end of a calendar month has not historically been the best period of the month to start a new trade, It’s because the price is trending unusually high to reverse its trend.

The range traders should be aware that the beginning or end of a calendar month has been a perfect time of the month to enter a new operation for the same reason.

What is the best day of the week to trade Forex?

The day of the week to trade can be an essential factor in Forex trading. However, its importance will vary depending on whether you are a day trader or a swing or long-term position trader.

Day traders don’t leave trading open on the weekend when markets are closed, so you don’t have to worry about the risks associated with doing that.

Long-term traders should be aware that there are significant risks in leaving trades open over the weekend. Stop losses can be surpassed if the market opens early the following week with a price gap beyond stop loss. This means that you can lose much more than you had anticipated in the worst case. You cannot exit Forex trading on the weekend, although some rare instances of brokers offer weekend trading facilities to their clients.

Consider you are a long-term trader hoping to make a winning trade that lasts a few days. In that case, the earlier in the week you enter a trade, the better chance you have of exiting it with a profit.

It is believed that the Forex market tends to start the week quietly and then tends to grow in volatility as the week advances towards the weekend. Historical data shows this to be broadly true. 

Consider you are a day trader, it makes sense to trade during the most volatile periods. This means that Monday can be a good day not to be in the market, while Thursday is a day not to miss. 

Suppose you are a swing or position trader. In that case, it makes sense to try to enter new trades early in the week and then hopefully profit from the higher volatility late in the week before maybe get out of the operation before the weekend. 

The Forex market is often moved by the main economic announcements of governments and central banks, especially those related to the US dollar. These data announcements tend to be scheduled towards the end of the workweek, with nothing generally scheduled on Mondays.

Another factor is Forex’s habit of charging the triple swap rate at the close of Wednesday in New York. This means that it is cheaper to trade after that day has passed. This helps increase volatility near the end of the week.

Lastly, keep in mind that volatility in a Forex currency pair is likely to be abnormally low if you are trading a currency on a public holiday in the country.

Best day of the week for swing/position traders

There is an advantage for long-term traders to enter new trades as early as possible in the week. There are additional factors to consider.

It is believed that the Forex market tends to start the week indecisively, changing direction on Monday and Tuesday before beginning to trend more decisively from Wednesday to Friday. 

The best entries for long-term trend traders have tended to occur on Wednesday and Thursday. Long-term traders looking for range trading strategies have been more successful entering trades towards the end of Friday and Monday.

Best time of day to trade Forex

If you are a day trader, it will be helpful to know if there have historically been any additional advantages to entering trades at a particular time of day. Again, this will be of great use to day traders, who need to trade intensively and therefore must make very effective use of their time.

A currency often fluctuates more in value during your country’s business hours due to international trade. Considering this, if you live in Asia and want to trade during the day, you will see the most price movement when trading crosses of Asian currencies such as AUD/JPY.

This is somewhat complicated because the global Forex market is dominated by trades in London and New York, where higher volumes of currency trades occur than anywhere else. Therefore, the largest Forex price movement you are likely to see generally is during London and New York business hours. The peak time is the few hours when both markets are open simultaneously.

Consider you are a day trader looking to profit from trading during the most volatile times of the day. You are likely to be better off concentrating on the active hours. This can be difficult if you live in a time zone away from UTC and don’t want to be awake in the middle of the night. In this case, it would be reasonable for you to consider becoming a swing or position trader or trading currencies whose working hours are available during the time you have for your trade. For instance, if you live in Australia, you may find it more comfortable to concentrate on trading AUD/JPY, AUD/NZD, and AUD/USD.

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