Forex trading can be lucrative but it is also very risky. What you are opening a forex trade you are basically amplifying tiny movements in a currency hundreds if not thousands of time in an attempt to make a profit. Let’s look at spread betting for instance:
Spreadbetting on financial markets is practically available 24 hours per day for forex and commodity traders while regional market opening times apply for bets to be placed on shares. Most trading platforms support 24 hour trading but, depending on the particular market that you wish to trade both the spreads and volatility will differ throughout the day.
For forex spreadbetting you will need to be aware of the different levels of activity between the regional markets in order to trade these at their optimum time. Forex markets tend to become fairly quiet several hours after the local stock markets have closed and as new international exchanges open elsewhere in the world. For example, if you trade the Euro/USD inTokyo during the morning sessionyou will typically experience low volatility and subdued market movements as many European and US traders have reached the end of the working day and equity markets in both the Euro and USD regions have closed.
Some traders, depending on their individual strategies, prefer to spreadbet on forex during the quiet hours when the market moves slowly on low trading volume. However, many choose not tospreadbet due to the wider spreads which are a consequence of theselow volumes and the brokers’ desire to limit trading during these hours or at least cover any positions taken during this time. Trading within market hours will allow you to trade closer to the advertised competitive spreads of your broker. This will typically be between 1-3 pips for major forex pairs and indices giving traders a much closer entry to the market price.
Most spreadbetters enjoy trading during the times of peak activity in their chosen market. For forex and index markets this will typically be around the opening and the close of the regional stockmarkets. Both forex and shares are sensitive to news releases and these typically occur during the first trading hours of the day where markets can be incredibly volatile depending on the impact level of the news releases. Having a reasonable idea and calendar about which news events will effect which market and to what extent will help you to determine your entry level while preventing too many shock price movement for morning spreadbetters.
Whilst spreadbetting during market hours is the preferred choice of many traders, throughout this period there are several key times when the markets become more active. For the European market the key points to watch for in terms of volatility will be the first half an hour of the market open as well as the news releases scheduled by mainland Europe and the UK. The differential in time between these means it worth making sure that you have any scheduled news releases in your local time to avoid any volatility shocks.
For the European session, the opening of the US Market and the Wall Street exchange creates another wave of excitement. The European market will tend to follow the US closely and any large movements will be reflected in European stocks and currency pairings. For European spreadbettershaving an idea about news releases in the US will help to determine the level of activity towards the close of the European Markets. Typically, beyond 16:30pm these are beginning to quieten down in regards to share price movements, although for spreadbetters the forex pairs will continue to be influenced by the US markets until around 9pm GMT.
For those interested in spread betting I’ve been browsing youtube and I’ve found this youtube channel very useful: https://www.youtube.com/user/ukspreadbetting These guys publish regular interviews with experienced forex traders and it’s all very interesting.