Many traders believe that the derivatives market is full of profit opportunities throughout the day, but which period is the best time?
The derivatives market can be traded 24 hours a day, five days a week. This creates a convenient market that can be traded all day. Traders who have just started trading can easily fall into long-term trading because of the millisecond market fluctuation. They believe that in a market full of opportunities, they should seize trading opportunities as much as possible.
Since the market has been operating, unlike the stock market, which has fixed trading hours, even if it sounds tempting, it is full of risks, and it is easy for traders to run out of capital or blur the focus of the investment.
Even if you are an experienced trader, you need to have a clear focus on trading to make wise trading decisions in the market. In addition to watching the market all day, what other options are there?
We believe that traders who want an ideal profit opportunity can adequately understand the market and set goals.
How to understand the market? We divide the whole day market into four sections. The entire day starts in Sydney 24 hours a day, followed by Tokyo, London, and New York. To make it easier for everyone to understand, the following will explain each period in local time.
Open from 1 am1 am to 4 pm, equivalent to 5 pm to 2 am Eastern Time. Although Sydney is the smallest market, it is the place where daily trading officially opens.
The opening of Sydney is when the market restarts every weekend. At this time, there will be many initial transactions. Even if all transactions are suspended during the weekend, consider that economic trends and news continue to affect the market. There are often gaps in these periods on the first day of the week because traders restructure their positions.
Open from 9 am to 6 pm, equivalent to 7 pm to 4 am Eastern Time. Tokyo is the first trading market opened in Asia, and it has the most significant trading volume in Asia.
During this period, currency pairs related to the Australian, New Zealand, and Japanese currencies were frequently traded in large quantities. At this time, the US-Japan currency pair is the most popular trading product. This is due to the substantial influence of the Bank of Japan on the market.
It opens from 8 am to 4 pm, equivalent to 3 am to 11 am Eastern Time. The United Kingdom dominates the world's currency markets, and London is the world's central trading center.
About 43% of the world's transactions are in the U.K., so traders need to pay close attention to the Bank of England's interest rate and monetary policy. Because it sets the tone for currency pairs that include the British pound. The trend of many currency pairs often sets the style during this period. Traders who rely on technical analysis can also find ideal trading opportunities at this time.
New York Time
It opens from eight o'clock in the morning to close at five o'clock in the afternoon, U.S. Eastern Time. New York is the second-largest foreign exchange market in the world and attracts much attention from foreign investors. Because in this market, about 90% of transactions cover the U.S. dollar.
The transactions generated on the New York Stock Exchange will immediately and drastically affect the trend of the U.S. dollar; significantly when a business merger or acquisition is finalized, the U.S. dollar may change direction.
However, not all times of the day are equally suitable for trading. The best trading timing is when the market is hottest, and when the market overlaps, there will be the most transactions.
When only one market is opened, the currency pair usually only changes about 30 points, but the spread of two needs at the same time usually rises to 70 points, especially when big news is released.
The best trading time is when the open market trading hours overlap, at which time the market will generate greater trading volume. Therefore, more traders and institutions are trading enthusiastically from time to time. Many institutional traders will sell orders at the end of the period, which will cause retail traders to face large fluctuations in the market.
Characteristics of overlapping markets
The most important overlap period is when the New York and London foreign exchange markets overlap. When the two markets overlap, more than 70% of transactions will be generated. The reason is that the U.S. dollar and the euro are the most popular trading currencies, and also because of the high volatility of these two currencies is the prime time for trading.
Sydney and Tokyo overlap during the period. This period is not as volatile as the above period, but for traders who focus on Australian and Japanese currencies, this is an excellent time to make a profit.
London and Tokyo overlap time is the least traded interval of the three overlap times. It is the early morning of the American market, and only one hour of overlap will not significantly change the spread.
In addition to understanding the market and its overlap to help you plan your trading schedule, traders can't ignore the impact of news points. When high-impact economic data is released, the market will have the phenomenon of currency pair prices rushing higher.
The best trading timing depends on the personality of the trader and the currency of the leading trade, but the trader should not over-trade.