Currency pair

Currency pair: A pair of currencies that are being exchanged or whose relative value is being invested in. A currency (forex) pair includes a base currency (the base unit according to which one unit of the pair is DEFINED) and its counter currency (the currency upon which the pair is VALUATED).

Breaking Down the Forex Day

Breaking Down the Forex Day - text

The forex market opens on Sunday evening and trades continuously until Friday evening.

You can choose 10pm GMT as the start (and end) of day, in order to break down the trading day opportunities hour by hour. Many global market participants use the same times.

Around 10pm GMT, the currency markets get very quiet; US is going home, Europe is getting ready for bed, and the Far East has not quite rolled out of bed yet.

That only leaves Australia and New Zealand. Clearly, the markets are normally quiet around 10pm GMT

The European market  (Opens 7am GMT)

The Asia traders are getting ready to go home and the European traders are getting started.

A good place to start is with the Asia high and low.

Think about buying when price gets above the Asia high and think about selling when price gets below the Asia low

London scheduled news events (Opens 9:30am GMT)

There are four possible courses of action around UK key scheduled news events.

1)      Close your GBP trade before the news.

2)      Open a new GBP trade before the news is released.

3)      Jump into a GBP trade during the news spike.

4)      Try to catch the turn with a GBP trade after the news spike.

Daily exchange rate fixing (Opens 11am GMT)

Look out for directional changes; financial institutions have a vested interest in the 11am London Time fixing exchange rate and will try to influence the price at times.

US key economic news releases (1:30pm GMT)

There are four possible courses of action around US key scheduled news events.

1)      Close your USD trade before the news.

2)      Open a new USD trade before the news is released.

3)      Jump into a USD trade during the news spike.

4)      Try to catch the turn with a USD trade after the news spike.

Currency option daily expiration (3pm London Time)

These are over the counter derivative trades that settle at 3pm GMT on a daily basis.

Look out for directional changes here; financial institutions have a vested interest in the 3pm GMT option expiration price and will try to influence the price at times.

European closing (4pm GMT)

Look out for directional changes;

European traders are closing out their trades for the day and oftentimes the prices reached between 4pm GMT and 5pm GMT Time turn out to be the days extreme prices

So What Have You Learned

The forex trading day has many fundamental pockets of activity that can have a significant impact on the currency pair price action

Awareness of these special times can improve your trade risk management

Add to your trade selection process, and possibly generate new trade ideas That you did not consider before