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The Importance of Trading Times
Trading Times - text
Trading at different times throughout the day, the markets present different opportunities. This is down to the volume in the market and liquidity at that time.
Liquidity essentially means how many participants are trading in that market over a set period of time. Markets, depending on what they are, present different trading opportunities at different times.
To give you an idea, we have different sessions such as the European trading session, the US trading session, and the Asian trading session.
So you need to be aware that when you are trading the markets, depending on the time of day you are trading you can expect to encounter different levels of volume and market activity.
It means that there are more participants to trade with, and therefore more liquidity. This makes it easier to get in and out of trades, which is very important. If there are fewer participants, the chances of getting the prices you like are lower as there are less people offering these prices.
Within any trading session there are also different timeframes that are important. For example, the open always provides an increase in volume. When a market closes this also leads to increased volume, as this is when people may take the opportunity to close positions or perhaps get into new positions to hold overnight.
So you need to be aware that there is usually a spike in volume at the opens, mid-session, and the close. This occurrence may vary from market to market individually, but predominantly that trend will prevail across the markets.
We also need to be aware that there are seasonal factors that can affect the traded quantity and volume. For example, in the summer months there may be a drop in volume as people go on holiday, and we may similarly see a spike in volume in February, March and April when people are looking to get into positions for the quarter, or for the year. We may also see a drop in volume in the winter months (markets tend to consolidate), particularly in the run up to Christmas. These are simple things, but you need to be aware that seasonal factors can have an impact on the markets.
Being aware of these can make your trade entry and exit more efficient which is key.
There are various timeframes associated with trading data releases you have to be aware of. Before a figure we may see a drop in volume because people are waiting to see the results of the figure before entering or exiting trades. We may also see a jump in volume and liquidity after the figures are released.
So be aware that before data releases volumes may drop so it may not be advisable to trade pre figure. And we may see a spike after a data release, depending on the figure individually. This may then be an indication of an opportunity to trade again, once the volume has returned to the market.