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What is the Best Time to Trade Forex?

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What is the Best Time to Trade Forex?

In the 24-hour Forex market, timing is critical. Choosing the best time to trade is a powerful way to maximize the profit potential of every trade. Professional traders know this secret. They carefully choose the timing of their trades to produce the most profits. You can make this same choice — and maximize your profits on every trade. In short, you can choose to trade the Power Hours. Let’s examine what gives the Power Hours their remarkable potency. This can be summarized in two words: volume and volatility.

What Are The Power Hours?

The Power Hours are the times when volume and volatility rise to peak levels. High trading volume means that many lots of a particular currency pairs are being bought and sold. High volatility means that currency pair prices are moving fast and trending quickly.

The combined force of high volume and strong volatility can cause large pip movements in nearly every major currency pair during the Power Hours.

When Are The Power Hours?

The Power Hours run from 8am to 12pm EST.

Yes, the most active trading period lasts only four hours every day! This is the US-European overlap session, which is the time when the world’s two most active trading centers cross -- as the European session is closing and the US session is opening. It is a small, but very active, window that some currency traders call the “hot zone.” And many professional traders focus their best efforts on trading during those four powerful hours.

Which Currencies Should I Trade During the Power Hours?

Look for the following currencies to make the largest pip movements during the Power Hours.

  • EUR/USD
  • USD/CHF
  • USD/CAD
  • GBP/JPY
  • GBP/CHF

Are You Busy During The Power Hours?

There are other trading times that can produce good results though usually not as dramatic as in the Power Hours. The European and the U.S. sessions can also show strong volume and volatility for trading. Remember, they are the world’s two largest trading centers so the trader can still find good price action.

The European Session

The European session is headquartered in London. The large number of market participants has made London the world’s most volatile market for trading currencies. And it links with both the Asian and American sessions.

Look at the GBP/JPY and the GBP/CHF for strong price movements as European assets are converted into dollar-denominated assets. These conversions can cause the currencies to make strong price movements.

Be prepared to get up early (or stay up late) because the European session runs from 2am to 12pm EST.

European Session Watch List:

  • GBP/CHF
  • GBP/JPY
  • USD/CHF
  • GBP/USD
  • USD/CAD

The US Session

The US session is headquartered in New York. The GBP/JPY and USD/CHF show high volume and volatility during this time since their transactions require US dollars. Trading during this session becomes even more active when the US stock and bond markets open because foreign investors need to convert their currencies into dollar-dominated assets. The GBP/CHF often makes strong price movements during this period.

The US session runs from 8am to 5pm EST.

US Session Watch List:

  • GBP/CHF
  • GBP/JPY
  • USD/CHF
  • GBP/USD
  • USD/CAD

When Should I Avoid Trading?

The least active time to trade -- dare we call it the “cold zone” -- is the European-Asian overlap session. Most traders are sleeping (or taking a nap) during this short period. Trading volume is very thin and trends are unpredictable during this period. Stay out of the cold zone! However, this is a good time to get prepared for the opening of the European session.

The cold zone runs from 2am to 4am EST.

Remember, timing is a strong and important tool that action-seeking traders can use to find strong price movements. The Power Hours open a window for many trading opportunities. So, be prepared to trade like (and with) the professionals to make quick profits during these powerful hours.

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