Because it is no a centralized market, Forex is open 24 hours a day Monday through Friday. However, not all time is equally suitable to enter the market. In fact, there are periods that offer excellent earning potential while others should be avoided since they have low liquidity and movement.
Many traders know that the period corresponding to the London session is the period that has more movement compared to other sessions, however, there are certain days in the week in which markets tend to show more movement.
Usually it is best to trade during midweek, as in this period is when most of the action occurs in the market.
Friday markets remain relatively active until 12:00 pm EST and thereafter the activity falls until the closing occurs at 5:00 pm EST. This means that on Friday, traders work only half a day since most are kept off the market for the rest of the trading session.
Except for the more conservative traders who prefer the slower and less volatile markets, the most suitable periods for Forex trading are those with higher levels of liquidity and volatility as they present the most extensive movements and clearer trends. This increases the chances of success of the trader.
How to manage trading time efficiently?
Unless you do not sleep, there is no way we can trade successfully in all market sessions. Even if we could do it, there is no valid reason that justify it. While the Forex market is open 24 hours a day, this does not mean that there are good opportunities all the time.
In addition, sleep is vital for good physical and mental health. And mental health in turn is essential for good analysis and decision making. If we do not rest properly, sooner or later we will take poor decisions in our trades.
Every trader must learn what are the best times to enter the market and what are the periods that should be avoided and in which we should focus on something else. Know the best periods in which we should trade and those in which we must avoid the market can help us increase our chances of success and avoid being trapped in a bad position by entering the market when we should not.
The best periods to enter the market
- When two important market sessions overlap. These are also the periods when the most important economic indicators which have the potential to increase volatility and provide directional movements are announced. It is important that the trader knows the opening and closing time of the trading sessions to see when the overlaps between sessions occur.
- The European session tends to be the most active and volatile compared to the others.
- Normally the trading sessions in the midweek show the most important movements since the range of pips for most currency pairs expands.
The worst periods to enter the market
- Sunday: Most traders are enjoying the weekend.
- Friday: Liquidity is significantly reduced during the latter part of the U.S. session.
- Holidays: Most traders are taking a break.
- Events and important economic news: The market has excess volatility and the trader can end trapped in the opposite direction of an important movement.