Best Time To Trade Forex
Many people ask me what is the Best Time To Trade Forex. My usual answer is “that depends”. There are many variables as to when is the best time to trade the forex market and they will change from person to person. This article focus on the different things to consider when you are looking for the optimum time for you to trade forex.
First of all you should look at what time you have to trade, if you work from 9-5 EST then you will have to rule that part out. If you have your whole day to consider, you’re in a much better position. You also need to look at what time zone you are in as well. The market moves around the clock and some traders try and trade around the clock and get burned out.
You also need to figure out what kind of trader you are. If you like to trade the news announcements then you need to be at your computer from 8:30-10am ET to catch the US news and also at the open of the European session and Asian sessions for the majority of their announcements. (not my kind of trading)
Another thing you will have to consider is what time frames you trade. If you are a scalper trading on 5 minute charts, when you will want to watch the charts when different markets are open at the same time for the best volatility. If you are a swing trader or an intra-day trader then you will not need to spend as much time at the computer each day and you can be a little less concerned about what time you have.
I prefer spending an hour or two in the morning (I live in the Pacific time zone US) and an hour or so in the evening before I go to bed. I am primarily an intra-day Trader and I spend most of my time between the 1 Hour, 4 Hour and the 1 Day charts. So this works for me. Because I work from home on my computer, I can keep an eye on my trades here and there as I feel like, but I find that I do better if I am not staring at my trades.
Here is a graphic I made to help me know when the markets are open and overlapping around the world. email me if you would like the .pdf file with different time zones.
Hope this helps you find your sweet spot for the best time to trade forex.
Forex Probabilities
How important are Forex Probabilities when trading?
When a beginning trader thinks about winning and losing in the Forex market they will usually consider it some kind of luck. It usually is at the start, but a seasoned trader should be focusing more on Forex Probabilities. As you more clearly understand the market, you will start to figure out that the “luck” mindset is not healthy to your trading success.
I want to talk a little about the different aspects of trading on probabilities. There are some requirements to be able to trade on probabilities. First of all, you have to know what you are doing, at least at some level (which excludes the beginning trader). Second, you have to have tested your techniques and strategies so you know what you can expect in different market conditions. Third, you need to be able to control the emotions that throw the positive effects of Forex probabilities out the window. If you can master these three things then you can start to “Trade on Probabilities”.
You will want to know the rough probabilities for a couple of key elements: Your Risk/Reward Ratio and your Win/Loss Ratio. Understanding what your Win/Loss ratio is on any particular strategy you are trading helps you trade more successfully over the long run. When you incorporate that understanding with a positive Risk/Reward ratio it will only help boost your profits. Let me explain with an example:
If I had a trading strategy that has returned a 70% winning record over the past 3 months, then I can safely expect that 7 in 10 of the trades I place will be winners. That is, as long as I have clearly defined entry and exit rules and I follow those rules. This might sound good to you, but you need to know the Risk/Reward ratio before you can determine if it is a solid system. If the losses are twice as big as the gains, then you will end up poorer at the end of the month for trading it. So a high probability strategy incorporates both W/L & R/R.
Sometimes your emotions and your mindset can get in the way of a profitable system. Let’s say you find a strategy that is only 30% successful, meaning that you have lost 7 of every 10 trades using it. Most people would throw it out the window looking for a better system, but without knowing the R/R how can you know if it is profitable or not? What if the wins were 3 times the size of the average loser. Here is some Math:
10 Trades, 30% Wins
3 Wins at 90 pips each = +270 pips
7 Losses at 30 pips each = -210 pips
Total Net gain of 60 pips
This is just an example, but you can see that if you react emotionally to losing 70% of your trades by throwing the system out, you are rejecting a lot of potentially profitable trades. The easiest thing to do is only trade strategies that have both a positive Win/Loss record and a better than 50/50 Risk/Reward ratio. The hardest thing to do is to find them.
The best thing you can do to eliminate the emotional problems related to probabilities is to view your trading success and failure based on a larger time frame. Looking at your wins each day or every trade will make it much harder to see the bigger picture. If you view your results per week or month then you can see more clearly what’s working and what isn’t. It is also imperative to keep a detailed trade journal about all your trades, so you will be able to look at each strategy separately to determine its effectiveness. But journaling is a whole other topic.
I hope this helps you begin to think about Forex Probabilities in a new light.
Good luck in your trading.
Forex In The Summer
Many people ask me how to trade Forex In The Summer months. They wee that the markets move differently in the summer and try to find ways to catch their pips inspite of the normal channeling markets. It is true that because of vacations and holidays and everything that people do all summer long that there is not as much activity during the summer months. One reason is that most of Europe takes the month of August off: banks, investors, businesses etc. So there is much less money flowing.
I usually use this as an excuse to do the same. I plan my trips in August, and don’t do a lot of trading. I look forward to September and the fall when things start cooking again. There are good strategies to trading, but usually they involve going to shorter time frame charts because the moves are not as big.
For some of the strategies we use in our mastermind club, feel free to join us for free in our weekly live trading club at http://www.lotsofpips.com
Forex in the Summer can be a bit of a drag, so my advice to you is take it easy, play the demo acct. and start planning your vacations in August.
Good luck trading and have a good summer. See you this fall.