You must do the things you think you cannot do.

- Eleanor Roosevelt

Saturday, August 7, 2010

Market Hour Range

I noticed something the other day when I lost a handful of pips before regaining it. If I had put in a little more time studying it prior to trading I may have escaped the loss or at least would have had a better understanding of the action. It has something to do with market activity.

As you may know, the forex market is open at all hours between Sunday at 5 pm EST (10 pm GMT) until its close on Friday at 5pm EST (10 pm GMT). But that does not mean that each moment of trading is equal during that time. Some times are quiet and some times are much more active.

According to Baby Pips the London trading session has the largest pip range, nearly 20% greater than either the Tokyo or US sessions. The London session opens from 3 am EST to 12 pm EST. The reason it sees the largest range is because of the session overlaps that occur during this time period. Tokyo closes at 4 am EST, after London opens, and the US opens at 8 am EST far ahead of the London close. The overlap means a greater amount of traders in the market pushing it one way or the other.

There is, of course, a lot to be gained from being in the market at the correct hours. Knowing when new players are likely to enter the market can be a great boon, especially if those players may have a slightly different world view and thus a different disposition towards your favorite pair.

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