Q) Hi Ed, thanks for the great insights. Question regarding timing - are there better times of the day to trade certain pairs? For example GBP/JPY appears to have tremendous moves starting at 3:30 am eastern time, hard for some of us to keep up at that hour. So are there better pairs to trade after dinner time on the east coast between 7 pm & 11 pm eastern time. I say evening because I am not a full time trader yet, still need to pay the bills with a day job. Your guidance is greatly appreciated.
Ed Ponsi) Thank you for your email. The reason why you are seeing big moves in the Great Britain Pound – Japanese Yen currency pair (symbol GBP/JPY) at that hour is because when it is 3:30 am in New York, it is 8:30 am in London. London is the world's capital of Forex trading, accounting for approximately 30% of all trading volume, and when those big traders wake up and start throwing their weight around, the market responds with volatility. Also, U.K economic indicators are often released at that time of day, adding to the overall climate of high volume and volatility.
Here's a recent example; on June 19, 2008, U.K. Retail Sales figures were released for the month of May. The record monthly increase in sales of 3.5% was far above the estimate of -0.1%, and the Pound rocketed higher against a variety of currencies, including the Japanese Yen, as a result. Please note that this chart is notated in Greenwich Mean Time, which is currently four hours ahead of New York time – meaning that the move occurs at about 4:30 am Eastern time. GMT is used frequently by Forex traders because of the international nature of the currency markets (see chart).
Does this mean that we have to get up at 4:00 am to trade Forex? No, but some people do. I used to get up very early to trade, but I think I've found a better way. Instead of focusing on time of day, I focus on price – every trade I place has a specific entry price, protective stop price, and at least one specific exit price. Since the trades are based on price and not time, I really don't care what time of day they execute – the only thing that matters to me is that I get the price that I want.
Many currency pairs are active during the Asian session, which begins around 6 to 7 pm Eastern time. For those who live on the U.S. East Coast and work normal hours, this is an excellent time of day to trade Forex. The main Japanese Yen pairs (USD/JPY, EUR/JPY, GBP/JPY) tend to be very active at this time of day, as well as major pairs such as EUR/USD and GBP/USD. The Australian Dollar and New Zealand Dollar pairs also enjoy an increase in activity. The action tends to fade after midnight Eastern (New York) time, and things get quiet until – you guessed it – around 3:00 am Eastern time, when European and U.K. traders get back in the game. Good luck!
