Before you place a trade, it’s important to decide on your
trading timeframe and also
understand when to place your trade.
The forex market doesn’t sleep.
The 24-hour nature of the forex market means traders have
the opportunity to place trades at
any time of day or night. You can’t buy shares in Barclays
after 4.30pm but you can buy EUR/
USD at midnight if you want!
Whilst this flexibility is a huge advantage, it does mean
that your open trading positions will be
moving whilst you’re tucked up in bed. For this reason we
always recommend using a stop-loss
when trading forex (see preserving your capital).
Trading volumes are at their highest during European and US
trading hours, whereas Asian
trading is generally much quieter. In fact, forex trading
volumes hit their peak during the
crossover period of the UK and US trading sessions – this is
from 2.30pm to 4.30pm British
time. So technically, it’s best to place a new forex trade
during this ‘crossover’ period.
However, different currency pairs are more likely to move
during certain times of the day.
For example, EUR/GBP will experience its greatest movement
during the European session.
Whereas AUD/USD can regularly experience large moves
overnight during Australian market
hours.
This isn’t to say that you shouldn’t be trading pairs that
are likely to move overnight. You just
have to be adequately equipped to trade them.
When trading a currency pair that is likely to be volatile
during the Asian session we recommend
placing a limit order along with your stop-loss.
A limit order is essentially an order to close your position
when it reaches a certain level of
profit. So placing a limit order will ensure that if the
market moves heavily in your favour
overnight, your position will be closed and your profits
will be taken.
In some instances, you will literally be making money while
you sleep
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