Even though the forex market is open 24 hours a day for 5 days of the week, this doesn’t mean that it is always active enough to trade. To swing trade, the market must be moving far enough so that you can profit from each of the swings. There are certain market hours that are more active than others and this has a direct impact on just how much the markets move.
There are three major trading sessions for forex. The Tokyo session, London session and US session.
The majority of movement and liquidity is during the London and US session as their open times overlap by 4 hours. While swing trading does not require you to be in front of your screen 24 hours a day, knowing when the most active market hours are allows you to be on the look out for potential setups and know when you should possibly consider closing out a trade.
Which day to trade?
Even the days of the week can vary greatly in how much market movement there typically is. Much like market hours, knowing which days are historically more active allows you to be prepared in advance and know when to look out for potential trades and manage any existing trades you may have open.
Sunday is the worst day to trade. Trade Sundays only if you wish to enter into a losing trade.
Fridays are also very unpredictable. Friday is the day that most large corporate market players and bank traders close out any open trades they may have made for that week. They are looking to take their profits and make their books look good for management and investors. Be smart, if the big boys are taking profits on Friday and closing out trades before the weekend, you should also be doing the same.
Holidays should also be avoided. Banks in countries with holidays are closed during these days and this greatly affects market movements. Take the day off unless you’d like to add a few more losing trades to your track record.
News report days. On days when major economic news reports are released, the markets are typically very flat andquiet. The majority of market players are waiting for the news release before they can make their decision on where the market is going to go. You should be extremely careful when trading on days with major economic news releases. It is very common for major spikes and erratic price movement on news release days. It is usually best to wait for the noise and panic to have resided before placing any trades.
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