Odd time zone? (NZ?) be Swing? or Position Trader?
Leverage: 3% maybe 5% no more: Learn to trade successfully without leverage
$1000 min balance
Make sure you open a forex spot account and not a forwards or futures account.
Thanks babypips.com
Quotes: BaseCurrency/Quote(or counter)Currency = rate
e.g. GBP/USD = 1.51258
rate – how much of quote currency to buy 1 unit of base currency
- You buy the pair = you buy GBP with USD
- If you think the base will appreciate against the quote you buy
- Buying = taking ‘long’ position
- You sell the pair = you sell the base for USD
- If you think the base will depreciate against the quote you sell
- Selling = taking ‘short’ position
Spread:
Dealer offers a bid & ask price
- bid = what dealer will pay you for the base currency (you are selling) paying out in the quote currency
- ask or ‘offer’ = what dealer will charge you for the base currency (you are buying) in the quote currency
- Bid usually < ask
- Bid – Ask = Spread and represents dealer margin
- Margin Trading
- Rollover rates
Broker Types
ECNs also allow their clients to see the “Depth of Market.” Depth of Market displays where the buy and sell orders of other market participants are.
FX Market: Types of Orders
When investors trade in the FX market, their first step is to place orders with their brokers to open or close a position. Or if trading for themselves, to open or close a position on their trading platform. The orders placed could be any of the following types of purchase orders:
Market Order: In a market order, an investor places an order to buy or sell a currency at the existing market price. These orders are normally executed in a matter of seconds.
Limit Order: In this FX Market type of order, an investor places an order to sell a currency at a predefined price. This order is placed to lock in a gain. A limit order is especially useful for a low-volume or extremely volatile currency pair, as it gives investors control over the sale price. This order is also useful when the investor expects the market to reverse its trend in the near term. The limit order remains active until the currency reaches a pre-specified price, after which it is automatically executed to clock in the gain desired by the investor.
A limit order has two variables, the time for which an order is active and the price level. An order that an investor specifies should remain active till he/she closes it is called Good Till Canceled (GTC). If an order remains active till the end of a trading day, it is called Good for the Day (GFD).
Stop Loss Order: A stop loss order is one that is placed to close a position before a currency value falls below a level settled by an investor. This order is placed to limit a possible loss in a currency pair transaction.
Stop Entry Order: In a stop entry order, an investor buys a currency above the market price or sells below the market price at a level settled earlier. The investor also specifies the duration for which the order should remain active. Such a purchase or sale is made only when the investor believes that the market would continue in the same direction. This type of order is usually issued to limit a possible loss on a transaction.
OCO (One Cancels Other) Order: An OCO order is a mix of two limit and/or stop orders in which an investor has specified the price and the duration for which the order should remain active. The OCO is such that when one order is executed, the other is cancelled immediately.
Lots:
- 1000 = micro
- 10,000 = mini
- 100,000 = standard
Different sessions, volatility of currency pairs differs
Asian (Tokyo):
- low liquidity
- more active in early part of session due to news announcements, China news important..
- Other than JPN crosses, more active in Asian Pacific crosses AUD/USD, NZD/USD than others
- Can set the tone for following sessions
- If NY session has big moves, expect consolidation in Tokoyo session
European (London)
- Active so high liquidity & low spreads
- Most trends start in this session & typically carry until start of NY session
- Trends can reverse near end of session as Euro traders lock in profits
- Volatility drops off in middle of session as people go for lunch prior to NY session opening
NY session
- High liquidity in AM as overlaps Euro session
- Most econ reports released at start of this session so can impact US$
- Volatility & Liquidity drops off once Euro session overlap ends
- Quiet on Fri PM as Asian traders leave work
- Poss reversals Fri as US traders close positions to minimise exposure to bad news over weekend
Summary best time of day to trade?
Toyko-London overlap:
- Not so busy as later half of Asian session quiet anyway, so European traders not expecting action at start of London session
London – NY
- The busiest period, impacted by US/Candana news, and late European news
- Euro traders consoldiating at close of London session = irratic US midday
Days of week to Trade:
EBS plaform, EUR/USD, USD/JPY, EUR/JPY, EUR/CHF, and USD/CHF are more liquid. Meanwhile, for the Reuters platform, GBP/USD, EUR/GBP, USD/CAD, AUD/USD, and NZD/USD are more liquid.
Major Currencies
Symbol | Country | Currency | Nickname |
---|---|---|---|
USD | United States | Dollar | Buck |
EUR | Euro zone members | Euro | Fiber |
JPY | Japan | Yen | Yen |
GBP | Great Britain | Pound | Cable |
CHF | Switzerland | Franc | Swissy |
CAD | Canada | Dollar | Loonie |
AUD | Australia | Dollar | Aussie |
NZD | New Zealand | Dollar | Kiwi |
Major Currency Pairs
The currency pairs listed below are considered the “majors”. These pairs all contain the U.S. dollar (USD) on one side and are the most frequently traded. The majors are the most liquid and widely traded currency pairs in the world.
Currency Pair | Countries | FX Geek Speak |
---|---|---|
EUR/USD | Euro zone / United States | “euro dollar” |
USD/JPY | United States / Japan | “dollar yen” |
GBP/USD | United Kingdom / United States | “pound dollar” |
USD/CHF | United States/ Switzerland | “dollar swissy” |
USD/CAD | United States / Canada | “dollar loonie” |
AUD/USD | Australia / United States | “aussie dollar” |
NZD/USD | New Zealand / United States | “kiwi dollar” |
Major Cross-Currency Pairs or Minor Currency Pairs
Currency pairs that don’t contain the U.S. dollar (USD) are known as cross-currency pairs or simply as the “crosses.” Major crosses are also known as “minors.” The most actively traded crosses are derived from the three major non-USD currencies: EUR, JPY, and GBP.
Euro Crosses
Currency Pair | Countries | FX Geek Speak |
---|---|---|
EUR/CHF | Euro zone / Switzerland | “euro swissy” |
EUR/GBP | Euro zone / United Kingdom | “euro pound” |
EUR/CAD | Euro zone / Canada | “euro loonie” |
EUR/AUD | Euro zone / Australia | “euro aussie” |
EUR/NZD | Euro zone / New Zealand | “euro kiwi” |
Yen Crosses
Currency Pair | Countries | FX Geek Speak |
---|---|---|
EUR/JPY | Euro zone / Japan | “euro yen” or “yuppy” |
GBP/JPY | United Kingdom / Japan | “pound yen” or “guppy” |
CHF/JPY | Switzerland / Japan | “swissy yen” |
CAD/JPY | Canada / Japan | “loonie yen” |
AUD/JPY | Australia / Japan | “aussie yen” |
NZD/JPY | New Zealand / Japan | “kiwi yen” |
Pound Crosses
Pair | Countries | FX Geek Speak |
---|---|---|
GBP/CHF | United Kingdom / Switzerland | “pound swissy” |
GBP/AUD | United Kingdom / Australia | “pound aussie” |
GBP/CAD | United Kingdom / Canada | “pound loonie” |
GBP/NZD | United Kingdom / New Zealand | “pound kiwi” |
Other Crosses
Pair | Countries | FX Geek Speak |
---|---|---|
AUD/CHF | Australia / Switzerland | “aussie swissy” |
AUD/CAD | Australia / Canada | “aussie loonie” |
AUD/NZD | Australia / New Zealand | “aussie kiwi” |
CAD/CHF | Canada / Switzerland | “loonie swissy” |
NZD/CHF | New Zealand / Switzerland | “kiwi swissy” |
NZD/CAD | New Zealand / Canada | “kiwi loonie” |
Sydney session, the Tokyo session, the London session, New York session
Summer (approx. April – October)
Time Zone | EDT | GMT |
---|---|---|
Sydney Open
Sydney Close |
6:00 PM
3:00 AM |
10:00 PM
7:00 AM |
Tokyo Open
Tokyo Close |
7:00 PM
4:00 AM |
11:00 PM
8:00 AM |
London Open
London Close |
3:00 AM
12:00 PM |
7:00 AM
4:00 PM |
New York Open
New York Close |
8:00 AM
5:00 PM |
12:00 PM
9:00 PM |
Winter (approx. October – April)
Time Zone | EST | GMT |
---|---|---|
Sydney Open
Sydney Close |
4:00 PM
1:00 AM |
9:00 PM
6:00 AM |
Tokyo Open
Tokyo Close |
6:00 PM
3:00 AM |
11:00 PM
8:00 AM |
London Open
London Close |
3:00 AM
12:00 PM |
8:00 AM
5:00 PM |
New York Open
New York Close |
8:00 AM
5:00 PM |
1:00 PM
10:00 PM |
Average pip movement of the major currency pairs during each forex trading session.
Pair | Tokyo | London | New York |
---|---|---|---|
EUR/USD | 76 | 114 | 92 |
GBP/USD | 92 | 127 | 99 |
USD/JPY | 51 | 66 | 59 |
AUD/USD | 77 | 83 | 81 |
NZD/USD | 62 | 72 | 70 |
USD/CAD | 57 | 96 | 96 |
USD/CHF | 67 | 102 | 83 |
EUR/JPY | 102 | 129 | 107 |
GBP/JPY | 118 | 151 | 132 |
AUD/JPY | 98 | 107 | 103 |
EUR/GBP | 78 | 61 | 47 |
EUR/CHF | 79 | 109 | 84 |
Below is a table of the Asian session pip ranges of the major currency pairs.
Pair | Tokyo |
---|---|
EUR/USD | 56 |
GBP/USD | 54 |
USD/JPY | 30 |
AUD/USD | 65 |
NZD/USD | 58 |
USD/CAD | 39 |
USD/CHF | 40 |
EUR/JPY | 57 |
GBP/JPY | 72 |
AUD/JPY | 65 |
EUR/GBP | 23 |
EUR/CHF | – |
These pip values were calculated using averages of past data from the month of May 2012. Take note that these are NOT ABSOLUTE VALUES and can vary depending on liquidity and other market conditions. Also, the session range for EUR/CHF has not been included since the Swiss franc has been pegged to the euro at 1.2000 during the period.
Below is a table of the London session pip ranges of the major currency pairs.
Pair | London |
---|---|
EUR/USD | 83 |
GBP/USD | 82 |
USD/JPY | 36 |
AUD/USD | 60 |
NZD/USD | 64 |
USD/CAD | 66 |
USD/CHF | 58 |
EUR/JPY | 80 |
GBP/JPY | 102 |
AUD/JPY | 86 |
EUR/GBP | 40 |
EUR/CHF | – |
These pip values were calculated using averages of past data from the month of May 2012. Take note that these are NOT ABSOLUTE VALUES and can vary depending on liquidity and other market conditions. Also, the session range for EUR/CHF has not been included since the Swiss franc has been pegged to the euro at 1.2000 during the period.
Here are some neat facts about European session:
- Because the London session crosses with the two other major trading sessions–and with London being such a key financial center–a large chunk of forex transactions take place during this time. This leads to high liquidity and potentially lower transaction costs, i.e., lower pip spreads.
- Due to the large amount of transactions that take place, the London trading session is normally the most volatile session.
- Most trends begin during the London session, and they typically will continue until the beginning of the New York session.
- Volatility tends to die down in the middle of the session, as traders often go off to eat lunch before waiting for the New York trading period to begin.
- Trends can sometimes reverse at the end of the London session, as European traders may decide to lock in profits.
Below is a table of the New York session pip ranges of the major currency pairs.
Pair | New York |
---|---|
EUR/USD | 77 |
GBP/USD | 68 |
USD/JPY | 34 |
AUD/USD | 68 |
NZD/USD | 62 |
USD/CAD | 67 |
USD/CHF | 56 |
EUR/JPY | 72 |
GBP/JPY | 77 |
AUD/JPY | 71 |
EUR/GBP | 36 |
EUR/CHF | – |
These pip values were calculated using averages of past data from the month of May 2012. Take note that these are NOT ABSOLUTE VALUES and can vary depending on liquidity and other market conditions. Also, the session range for EUR/CHF has not been included since the Swiss franc has been pegged to the euro at 1.2000 during the period.
Here are some tips you should know about trading during the New York session:
- There is high liquidity during the morning, as it overlaps with the European session.
- Most economic reports are released near the start of the New York session. Remember, about 85% of all trades involve the dollar, so whenever big time U.S. economic data is released, it has the potential to move the markets.
- Once European markets close shop, liquidity and volatility tends to die down during the afternoon U.S. session.
- There is very little movement Friday afternoon, as Asian traders are out singing in karaoke bars while European traders head off to the pub to watch the soccer match.
- Also on Fridays, there is the chance of reversals in the second half of the session, as U.S. traders close their positions ahead of the weekend, in order to limit exposure to any weekend news.
Best Days of the Week to Trade Forex
So now we know that the London session is the busiest out of all the other sessions, but there are also certain days in the week where all the markets tend to show more movement. Know the best days of the week to trade forex.
Below is a chart of average pip range for the major pairs for each day of the week:
Pair | Sunday | Monday | Tuesday | Wednesday | Thursday | Friday |
---|---|---|---|---|---|---|
EUR/USD | 69 | 109 | 142 | 136 | 145 | 144 |
GBP/USD | 73 | 149 | 172 | 152 | 169 | 179 |
USD/JPY | 41 | 65 | 82 | 91 | 124 | 98 |
AUD/USD | 58 | 84 | 114 | 99 | 115 | 111 |
NZD/USD | 28 | 81 | 98 | 87 | 100 | 96 |
USD/CAD | 43 | 93 | 112 | 106 | 120 | 125 |
USD/CHF | 55 | 84 | 119 | 107 | 104 | 116 |
EUR/JPY | 19 | 133 | 178 | 159 | 223 | 192 |
GBP/JPY | 100 | 169 | 213 | 179 | 270 | 232 |
EUR/GBP | 35 | 74 | 81 | 79 | 75 | 91 |
EUR/CHF | 35 | 55 | 55 | 64 | 87 | 76 |
As you can see from the chart above, it would probably be best to trade during the middle of the week, since this is when the most action happens.
Fridays are usually busy until 12:00 pm EST and then the market pretty much drops dead until it closes at 5:00 pm EST. This means we only work half-days on Fridays.
The weekend always starts early! Yippee!
So based on all these, we’ve learned when the busiest and best days of the week to trade forex are. The busiest times are usually the best times to trade since high volatility tends to present more opportunities.
Managing Yo Time Wisely
Unless you’re Edward Cullen, who does not sleep, there is no way you can trade all sessions. Even if you could, why would you? While the forex market is open 24 hours daily, it doesn’t mean that action happens all the time!
Besides, sleep is an integral part of a healthy lifestyle!
You need sleep to recharge and have energy so that you can do even the most mundane tasks like mowing the lawn, talking to your spouse, taking the dog for a walk, or organizing your stamp collection. You’ll definitely need your rest if you plan on becoming a hotshot currency trader.
Every trader should learn when to trade.
Actually, scratch that.
Every trader should know when to trade and when NOT to trade.
Knowing the optimal times you should trade and the times when you should sit out and just play some Clash of Clans can help save you a pound of moolah (pun intended).
Here’s a quick cheat sheet of the best and worst times to trade:
Best Times to Trade:
- When two sessions are overlapping of course! These are also the times where major news events come out to potentially spark some volatility and directional movements.
- The European session tends to be the busiest out of the three.
- The middle of the week typically shows the most movement, as the pip range widens for most of the major currency pairs.
Worst Times to Trade:
- Sundays – everyone is sleeping or enjoying their weekend!
- Fridays – liquidity dies down during the latter part of the U.S. session.
- Holidays – everybody is taking a break.
- Major news events – you don’t want to get whipsawed!
- During American Idol, the NBA Finals, or the Superbowl.