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Rhythm of Forex

18.02.2017

Successful trading on Forex requires the existence of a tested strategy that can bring guaranteed profit. Novice traders and many traders with a certain experience focus on developing or searching for a lucrative Forex strategy. However, not everyone understands that time of its use can significantly affect trading strategy.

All strategies without exceptions at different time, days of the week or even months work differently. Systems developed for trading the news, strategies based on the wave theory or principles of the Price Action — all show different results in different time periods. Forex indicators — the majority of trading systems base mainly on such instruments — at different time can provide more or less false signals.

Market volatility during the day

There are several periods during the day, which are called Forex trading sessions (Moscow time specified):

Pacific Session (from 1.00 to 9.00). At the beginning of this period there are no significant market fluctuations. This time mostly suits strategies, which focus on trading in flat. Trend strategies are less effective during this period. The Pacific session intersects with the Asian one, at the opening of which sharp price movements can occur. Forex indicators can not identify these dramatic movements.
Asian Session (from 2.00 to 10.00). At this time, financial sector of the Asian countries is active, mainly. At this time, Forex trading is characterized by long-run flat. However, just when the session is just opened, strong moves often appear — the Central Bank of Japan often intervenes to support or weaken the yen’s quotation. Thus, trading systems created for trading in some price range are the most effective during Asian session.
European Session (from 10.00 to 18.00). During this period, there are strong price movements. Volatility on Forex during the European session is higher than during the Asian one. At this time, channel strategies demonstrate the best profitability. Usually these strategies are applied to hourly timeframes. Also trend systems on timeframes from 15 minutes to an hour are also very profitable.
American Session (from 3 pm to 11 pm). At the American session market volatility reaches maximum as the most important news are published and the market reaction is quite strong. When the session opens, the current trend is often stopped or a new strong impulse arises. This new impulse forms a new trend. During this period trend strategies work well. It is good idea to use daily charts as a guide to determine further price direction.

Market volatility during the week

On Monday, a new trading week starts. Usually on Monday the market is calm, so it is better to choose channel strategies. However, on Monday, at the beginning of the Pacific session strong price impulses can arise. It means that the market is working out the events that happened on the weekend.

The strongest movements occur from Tuesday to Thursday. Trend, which formed during the American session on Monday, at the European session on Thursday, may weaken. If you follow long-term trading, the best strategy for these days will be the channel one. However, if you are intraday trader, according to the situation, any strategy may be effective.

It is almost impossible to forecast what may happen on Friday. Moreover, it is regardless of the time of day. Novice traders are advised to stay out of the market. Actually, experienced traders also prefer simply to monitor the market.

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