Forex Trading: Do You Have the Time?

Focus: FOREX

To aid the forex trader still deciding on what to examine, Adam Lemon of highlights the one factor that is oft overlooked-but which can be a surprisingly powerful element within a trading strategy-the time of day.

Forex traders searching for a profitable trading method usually look at candlestick analysis, fundamental economics, trends, and overbought or oversold indicators as guidelines for when to enter and exit trades. There is another factor that is often overlooked, but which can be a surprisingly powerful element within a trading strategy: the time of day in forex trading.

Volume and Time of Day in Forex Trading

It is well known that the majority of forex trading by volume occurs during the London and New York sessions with the peak period occurring during the overlap between the two. For this reason, many traders-especially day traders-prefer to trade between 8:00AM London time and 5:00PM New York time. Traders that live in time zones which render these hours' inconvenient face a dilemma which they often try to resolve by trading only longer-term time frames such as the daily chart, or perhaps a 4-hour chart, or maybe by focusing on Asian currencies which are assumed to be more active during Asian business hours than non-Asian currency pairs.

This two-pronged approach can use time of day in forex trading to determine which currency pairs should be traded and at which times of the day.