Which is the best to use in different day time (1)

Introduction:

Forex markets is working 24 hour per day from Sunday night to Friday night, 5 days, 24 hour which means that Forex market in not sleeping, but it may differ from time to time, as you know when English person got to bed to sleep, at the same time, Japanese person wake up from bed, that is difference of time from country to country, But is the Forex market the same in the 24 hour of the day, absolutely no, it differ significantly from time to time in volatility, which is the most driving factor of trading Forex.

What is volatility:

Volatility in Forex measured by pips, as example, when talking about 1 hour volatility of EUR/USD to be 15 pips during Asian time, it means that average move of EUR/USD up to down is 15 pips, as volatility increases, risk increase but often volatility supporting one direction which means clear trend.

General consideration about volatility:

  • Higher volatility increase risk and also increase profits for trading using margins, also it is the same using binary options as more volatility mean clear direction, then your deal will be in money or out money.
  • Lower volatility decrease risk but is killer for trading using binary options as it increases the chances to make a deal finish at the money, which means does not cover spread of call or put option.

Forex volatility differ with time:

Forex trading hours:

  • Sydney opens at 9:00 PM to 6:00 Am GMT.
  • Tokyo opens at 11:00 PM to 8 AM GMT.
  • London opens at 7:00 AM to 4:00 PM GMT.
  • New York opens at 12:00 noon to 9:00 PM GMT.
I made a graph below to show different times so that we can easily understand what happened in Forex market volatility.

Figure (1): Forex trading hours
Notices about Forex trading time:
  1. Between 21:00 to 23:00 GMT, only Sydney market is working, which is weak and often Forex market at this time has low volatility.
  2. Tokyo overlap with Sydney time between 23:00 to 6:00 GMT, at this time, Forex volatility increase from early Sydney hours.
  3. Between 6:00 to 7:00 GMT Forex volatility calmed again at the last hour of Tokyo market.
  4. At 7:00 GMT, London market opens and this renew energy of Forex volatility.
  5. Between 12:00 to 16:00 GMT, New York overlap with London time, at this time, more money enter markets making the highest Forex volatility hours.
  6. Although New your works alone from 16:00 to 9:00 GMT, but this period often have good volatility but less of the early hours of New your time and higher than the early hours of Sydney time.

Figure (2): USD/JPY at different Forex trading hours
From graph we can notice:

  • No volatility and low range trading at the first hours of Sydney time.
  • High volatility and strong movement at overlap time of Tokyo and Sydney and this specified for USD/JPY as JPY often make strong move during Japanese time.
  • Energy of volatility increased with London opening and increase more much at the overlap time of New York and London.
  • USD/JPY calmed again at the last hours of New York time before opening of Sydney and Tokyo.
In the next week, we will continue this topic with more real examples, because trading time is the most important thing for successful trading, so in next week, more examples and then check will done to see what is the best trading method to use -Margins or binary options- during different Forex trading time.
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