Forex trading times

The Best Forex Trading Hours. The best time to trade on the Forex (Foreign Exchange) is when the market is most active. When more traders are active, trading spreads -- the difference between the bid price and the asking price -- tend to narrow. The result is that less of your money goes to the market maker -- the specialist who trades the currency in question -- and more to the buyer and seller. The 4 Major Forex Exchanges.

Active trading markets are almost always better for traders, whether you are trading on the Forex, the NYSE or any other financial trading market. But for Forex traders, there's another good reason for trading when the market is most active volatility. As a result of the nature of the Foreign Exchange's four major exchanges -- New York, London, Singapore, and Tokyo -- when more than one exchange is open, not only does trading volume increase, but volatility significantly increases as well. Although investors often fear volatile markets, volatility -- the extent and rate at which an equity or currency price changes -- is good for traders. Without volatility, prices remain constant and trading cannot be profitable. With volatility comes risk, but also opportunity.

Worldwide Forex Markets Hours. The Forex has fifteen independent exchanges worldwide. All are open five days weekly, from Monday through Friday.

Each exchange has unique trading hours, but from a trading perspective, the four most important exchanges and their hours are the following (all times are Eastern Standard Time) London 3 AM to 12 PM (noon) New York 8 AM to 5 PM Singapore 3 PM to 12 AM (midnight) Tokyo 7 PM to 4 AM. Forex Trading Hour Overlaps. While each exchange is independent of the other, they are all trading the same currencies. This means that when two of these four large exchanges are open, the number of traders actively buying and selling currencies increases significantly. Bids and asks on one Forex exchange are immediately reflected in the bids and asks on any other open exchange, which both reduces market spreads and increases volatility. When you look at the exchange hours listed above, it becomes clear that trading hours on major exchanges occur in two markets simultaneously from 8 AM to 12 PM (noon) EST, when both New York and London exchanges are open 3 PM to 5 PM, when both New York and Singapore exchanges are open 7 PM to 12 AM (midnight) EST, when both Tokyo and Sydney exchanges are open 3 AM to 4 AM EST, when both Tokyo and London exchanges are open. The Best Forex Trading Hours.

These four overlaps are normally the three best times to trade. Of these, the most favorable trading time is the 8 AM to noon overlap when both New York and London exchanges are open. These two trading centers account for more than 50 percent of all trades on all 15 exchanges worldwide. Special situations can arise, however, that can make any hour of the day or night a favorable trading time. Normally, for example, from 5 PM to 6 PM EST is not a promising time to trade the only major open exchange is the Singapore exchange, which accounts for less than 10 percent of annual Forex trading volume.

If, however, there was a political or military crisis anywhere in the world that developed during this hour, volatility and trading volume would predictably spike in response, making this a very favorable time to trade. "Best" Doesn't Mean "Profitable" If you're just beginning to trade on the Forex, it's a good idea to proceed cautiously. Currency trades are highly leveraged -- sometimes as much as 1,000 to 1. This makes the idea of a big win appealing, but also means you can lose most of your money on a single trade.

A 2014 Citibank study concluded that although 84 percent of Forex retail traders believe they can make money, only 30 percent break even or better. It's often a good idea to open your Forex account at a firm that offers new investors "demo" trading, where the results are tallied but the gains and losses are imaginary. Once you see how you're doing in your demo account, you'll know better how to proceed. Disclaimer The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors.

Past performance is not indicative of future results. Investing involves risk including the possible loss of principal. FOREX-Dollar stabilises after selloff focus on N. Korea, Hurricane Irma. Reuters | Sep 11, 2017 0630. * North Korea refrains from missile test some had expected.

* ECB in agreement it will taper its bond buying-sources. * U. S. short dollar positions at highest level since Jan 2013. By Lisa Twaronite. TOKYO, Sept 11 (Reuters) - The dollar caught its breath in early Asian trading on Monday, pulling away from last week's lows against its major rivals after the weekend passed without any missile launches by North Korea.

Instead North Korea observed the 69th anniversary of its founding on Saturday with a celebration honouring the scientists behind the massive nuclear test it conducted last week. dollar added 0.5 percent against its perceived safe-haven Japanese counterpart to 108.38 yen JPY= , moving away from a 10-month nadir of 107.32 yen touched on Friday. The yen tends to benefit during times of economic and political uncertainty due to Japan's net creditor nation status. The dollar index , which tracks the U. S. unit against a basket of six major currencies, was 0.2 percent higher at 91.524.DXY , after skidding to a 2-12 year low of 91.011 on Friday.

"The general tone in the market had been the continuation of the dollar's weakness, but if you look at all the factors, it's not necessarily negative overall for the dollar," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities, citing the relative strength of the U. S. economy and investors' hope that a U. S. tax reform plan will eventually be passed. Still, he said, concerns about the simmering tensions on the Korea peninsula remain a source of pressure on the dollar, as well as the possible hit to U. S. growth from Hurricane Irma as it ravaged Florida. North Korea and Hurricane Irma are temporary factors, and neither is likely to have a long-term impact," he said.

"I would say dollar yen below 108 yen is a good level to buy, and I still expect the U. S. to come up with some kind of tax reform to shore up U. S. growth next year." U. S. President Donald Trump said on Saturday that he will ask the Republican-controlled Congress to further speed up its efforts to overhaul the U. S. tax code, citing the potential impact of Hurricane Irma as a reason to hasten reforms. levels of dollar short positions might also be setting the stage for a correction, Yamamoto said. Speculators' net short bets on the dollar grew to their highest since January 2013 in the latest week through Aug. 29, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday. IMMFX. The value of the dollar's net short position, derived from net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc and Canadian and Australian dollars, was $10.89 billion in the week, up from the previous week's net short position of $10.28 billion.

Moreover, a wider measure of dollar positioning that includes net contracts on the New Zealand dollar, Mexican peso, Brazilian real and Russian ruble showed a U. S. dollar net short position of $15.528 billion, up from $14.66 billion a week earlier. NETUSDALL= The euro was down 0.2 percent at $1.2015 EUR= , after it rose as high as $1.2092 on Friday, its loftiest since January 2015. Despite the strength of the common currency and prospects for further gains on expectations of a turn in monetary policy, the European Central Bank has signalled it is gearing up to taper its massive stimulus programme. Reuters reported on Friday that ECB policymakers agreed at their meeting on Thursday that their next step would be to begin reducing its bond buying, three sources with direct knowledge of the discussion said. euro has gained more than 14 percent against the dollar so far in 2017, on track for its best annual performance in 14 years. Meanwhile, Bitcoin tumbled 2 percent to $4,217.76 BTC=BTSP on the BitStamp platform, after reports that China was about to shut down local crypto-currency exchanges.

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Past Performance Past Performance is not an indicator of future results. Copyright © 2017 Forex Capital Markets. All rights reserved. What are The Best Forex Trading Times. The world is a vast place and as such, we have Different Time Zones . So when one country ends its trading day, another starts.

In other words, this means that Forex almost never stops! The major Financial Markets in the world have overlaping times. The heaviest trading takes time during this overlapping period and presents abundant trading opportunities. Trading Sessions GMT (Greenwich Mean Time) Winter Open Sunday, 1100 pm GMT Winter Close Friday, 1000 pm GMT.

The Forex Three-Session System. One of the greatest features of the foreign exchange market is that it is open 24 hours a day. This allows investors from around the world to trade during normal business hours, after work or even in the middle of the night. However, not all times are created equal. Although there is always a market for this most liquid of asset classes, there are times when price action is consistently volatile and periods when it is muted. What's more, different currency pairs exhibit varying activity over certain times of the trading day due to the general demographic of those market participants who are online at the time.

In this article, we will cover the major trading sessions, explore what kind of market activity can be expected over the different periods, and show how this knowledge can be adapted into a trading plan. Breaking a 24-Hour Market into Manageable Trading Sessions. While a 24-hour market offers a considerable advantage for many institutional and individual traders, because it guarantees liquidity and the opportunity to trade at any conceivable time, it also has its drawbacks. Although currencies can be traded anytime, a trader can only monitor a position for so long. This means that there will be times of missed opportunities, or worse – when a jump in volatility will lead the spot to move against an established position when the trader isn't around. To minimize this risk, a trader needs to be aware of when the market is typically volatile and decide what times are best for his or her strategy and trading style.

Traditionally, the market is separated into three sessions during which activity peaks the Asian, European and North American sessions. More casually, these three periods are also referred to as the Tokyo, London and New York sessions. These names are used interchangeably, as the three cities represent the major financial centers for each of the regions.

The markets are most active when these three powerhouses are conducting business as most banks and corporations make their day-to-day transactions and there is a greater concentration of speculators online. Now let's take a closer look at each of these sessions. When liquidity is restored to the forex (or FX) market after the weekend passes, the Asian markets are naturally the first to see action. Unofficially, activity from this part of the world is represented by the Tokyo capital markets, which are live from midnight to 6 a. m. Greenwich Mean Time. However, there are many other countries with considerable pull that are present during this period including China, Australia, New Zealand and Russia, among others. Considering how scattered these markets are, it makes sense that the beginning and end of the Asian session are stretched beyond the standard Tokyo hours.

Allowing for these different markets' activity, Asian hours are often considered to run between 11 p. m. and 8 a. m. GMT. European Session (London) Later in the trading day, just before the Asian trading hours come to a close, the European session takes over in keeping the currency market active. This FX time zone is very dense and includes a number of major financial markets that could stand in as the symbolic capital. When is the Best Time of Day to Trade Forex? Big data analysis, algorithmic trading, and retail trader sentiment.

Summary For most forex traders, the best time of day to trade is the Asian trading session hours. European currency pairs such as EURUSD show the best results . We analyzed over 12 million real trades conducted by a major FX broker, and we found that trader profits and losses could vary significantly by time of day. That data showed that most traders are what are called &ldquoRange Traders,&rdquo and their successes and failures very much depend on market conditions. In fact, this trading style means that many of them have trouble being successful in forex because they are trading during the wrong time of day.

Most forex traders are more successful during the late US, Asian or early European trading sessions &ndash essentially 2 PM to 6 AM Eastern Time (New York), which is 7 PM to 11 AM UK time. Why? We&rsquove seen records for thousands of traders, and the chart below shows a noteworthy trend pulled from real trades conducted by clients of a major FX broker from 2009-2010. The chart shows the profitability of traders with open positions broken down by hour of day across the five most popular currency pairs. Those profitability statistics can certainly vary on a day-to-day basis, but the patterns are impressively stable over the course of the year. But how does time of day affect the average trader&rsquos profitability? You can see that periods of strong trader performance line up with low-volatility trading hours.

Traders tend to see the best results during the Asian trading session, and the chart below shows that the Euro tends to move far less through this period. To see why volatility lines up so well with performance, we need to look at real trader behavior. Range trading strategies can be summarized quite simply&mdashbuy lowsell high. If a currency has fallen and is trading at or near significant support levels, the range trader will often buy.

If the same currency then trades higher and near important resistance, that same trader sells. This can work if price is not breaking major price levels and continues trading within relatively narrow ranges. Of course that same trader would do quite poorly if price broke significantly above resistance or below support. How do we avoid the worst market conditions for this particular style of trading? Do the Hours that I Trade Matter?

Yes, they matter a lot. We have constructed a strategy that closely models your &ldquotypical trader&rdquo. We simulated the strategy&rsquos performance trading the EURUSD 24 hours a day over the past ten years. The results are not good.

EuroDollar RSI Range Strategy Performance, Trading 24 Hours. Trade Rules for the RSI Trading Strategy. Buy Rule When the 14-period RSI crosses above 30, buy.

Sell Rule When RSI crosses below 70, sell. Yet once we factor in the time of day, things become interesting. We know that the Euro tends to move less through certain hours&mdashlet&rsquos use that to our advantage and make a rule to trade only during low-volatility times. This next chart shows the exact same strategy over the exact same time window, but the system does not open any trades during the most volatile time of day, 6 AM to 2 PM Eastern Time (11 AM to 7 PM London time). The difference is dramatic. EuroUS Dollar RSI Strategy Restricted to Trade between 2 00 PM and 600 AM Eastern Time.

Trade Rules for the RSI Asia Range Trading Strategy. Buy Rule When the 14-period RSI crosses above 30, buy. Sell Rule When RSI crosses below 70, sell.

Trade Filter Only allow the strategy to open trades after 0600 and before 1400 Eastern Time. By sticking to range trading only during the hours of 2pm to 6am, the typical trader would have hypothetically been far more successful over the past 10 years than the trader who ignored the time of day. What About Other Currency Pairs? Of course, not all currencies act the same. For example, the Japanese Yen tends to see more volatility during Asian hours than the Euro or British Pound these are the hours of the Japanese business day. We simulated the same filter as we used with the EuroUS Dollar.

The poor results speak for themselves. We find that the time filters have historically worked well for European currency pairs such as the EuroUS Dollar and the US DollarSwiss Franc. The filters also work fairly well for the GBPUSD. We might range trade these currency pairs during the 2 PM to 6AM time window. Unfortunately, our optimal time window does not work well for Asian currencies. Our tests of different time windows on the USDJPY, AUDUSD, and NZDUSD have not produced a single positive equity curve over the past 10 years.

This is due to the fact that these currencies are more often subject to large moves during Asia Session than the European currencies. Game Plan What Strategy Should I Use? Trade European currencies during the &ldquoOff Hours&rdquo using a range trading strategy. Our data show that over the past 10 years, many individual currency traders have been successful range trading European currency pairs during the &ldquooff hours&rdquo of 2 PM to 6 AM Eastern Time (7 PM to 11 AM UK Time). Many traders have been very unsuccessful trading these currencies during the volatile 6 AM to 2 PM time period. Asia-Pacific currencies can be difficult to range trade at any time of day, due to the fact that they tend to have less distinct periods of high and low volatility.

Model Strategy Range Trading with RSI on a 15 Minute Chart. For our models, we simulated a &ldquotypical trader&rdquo using one of the most common and simple intraday range trading strategies there is, following RSI on a 15 minute chart. Trade Rules for the RSI Asia Range Trading Strategy.

Buy Rule When the 14-period RSI crosses above 30, buy. Sell Rule When RSI crosses below 70, sell. Trade Filter Only allow the strategy to open trades after 0600 and before 1400 Eastern Time. The Traits of Successful Traders. This article is a part of our Traits of Successful Traders series. View the previous installment of this series The DailyFX Research team has been closely studying the trading trends of clients from a major FX broker, utilizing their enormous amount of trade data. We have gone through an enormous number of statistics and anonymized trading records in order to answer one question &ldquoWhat separates successful traders from unsuccessful traders?

&rdquo. We have been using this unique resource to distill some of the &ldquobest practices&rdquo that successful traders follow, such as the best time of day, appropriate use of leverage, the best currency pairs, and more. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. Learn To Trade The Market. Nial Fuller is a professional trader, author & coach who is considered ‘The Authority’ on Price Action Trading.

In 2016, Nial won the Million Dollar Trader Competition. He has a monthly readership of 250,000 traders and has taught over 20,000 students. Read More… Professional Trader, Author & Trading Coach.

Nial Fuller is a professional trader, author & coach who is considered ‘The Authority’ on Price Action Trading. In 2016, Nial won the Million Dollar Trader Competition. He has a monthly readership of 250,000 traders and has taught over 20,000 students. Read More… The Best Times to Trade Forex Currency Pairs (Part 2) Note If you have not done so already please read part 1 first The Best Currency Pairs to Trade.

In the first part of this article we discussed which currency pairs are the best to trade and explained the differences between the majors, crosses, and exotics. Today’s article is going to pick up where last week’s left off we are going to discuss the best times to trade the forex market and the differences between the various FX trading sessions. Since you have read part 1 and you now know which currency pairs to focus on and why, it is important that you understand when the different forex trading sessions are, how they differ from each other, and the best times and days to trade. It is true that the forex market is open 24 hours a day, but that doesn’t mean the market is active and worth trading for the entire day. The idea is to trade when the market is the most volatile, because volatility means that a market is moving, and money is made when the markets are moving, not when the market is quiet and calm. As a price action trader you should be especially excited about volatility, because price action strategies thrive in volatile market conditions due to the fact that they simply reflect the dynamics of price movement and provide you with easy to identify setups which allow you take advantage of volatility. When are the various forex trading sessions?

The 24-hour forex market trading day can be broken up into three major trading sessions (Note The chart to the right reflects the Tokyo open and ignores the Sydney open, we have included the Sydney open in the description below, which is an hour earlier than the Tokyo open. All times are based off summer hours in the Northern Hemisphere, the Asian session opens at 4pm EST during winter hours with the market opening in Sydney, London and New York hours remain the same) • Asian trading session (including Australia and New Zealand) the Asian trading session opens at 600pm EST and closes at 400am EST. • London trading session the London trading session opens at 300am EST and closes at 1200pm EST.

• New York trading session the New York trading session opens at 800am EST and closes at 500pm EST. You will notice that in between each trading session there is a window of time where two sessions are operating at the same time. From 300 – 400am EST, the Asian and London sessions overlap, and from 800-1200pm EST, the London and New York sessions overlap. As you may have guessed these over-lapping periods within the three trading sessions are the times when volume and volatility rise to peak levels. The over-lap of the London and New York trading sessions between 8am and 12pm EST is typically the best time to trade, because this is when the world’s two most active trading centers cross as the London session is closing the New York session is opening.

Many traders strictly trade this four hour time window because it is typically a very volatile and liquid time to trade the forex market. The Asian trading session The Asian trading session begins at 600pm EST as trading gets underway in New Zealand and Australia, an hour later at 7pm EST Tokyo opens up. Tokyo is the financial capital of Asia it is also worth noting that Japan is the third largest forex trading center in the world. The yen is the third most traded currency, involved in about 19.0% of all forex transactions overall about 21% of all forex transactions take place during the Asian trading session. • Financial hot spots of the Asian trading session include Tokyo, Hong Kong, Singapore, and Sydney.

• Liquidity is sometimes thin during the Asian session, this is why many FX traders avoid the Asian session and opt to trade the London New York sessions instead. That said, price will sometimes make powerful moves during the Asian session. • Major news releases for New Zealand, Australia, Japan, and China come out during the Asian session, so the NZD, AUD, and JPY currency pairs tend to move more than the others during the Asian session. (Chinese economic policy can influence other majors currencies even though China does not allow their currency to float on the international exchange) • Generally speaking, if the London and New York sessions result in big moves, you will see consolidation during the Asian session. The London trading session As Asia comes to a close the London trading session gets underway. There are several major financial centers scattered around Europe, but London has historically been the center of all forex trading.

About 30% of all forex transactions take place during the London trading session. • Due to the fact that the London session over-laps with the Asian and New York sessions, it is typically the most active trading session and this leads to high liquidityvolume and lower pip spreads. • The London session usually sees the most volatile market conditions because such a large amount of transactions take place during this trading period. Remember, volatility is good for price action traders since we deal with the core price data of the market, instead of secondary indicators that lag price. • Major European news releases mainly come out during the London trading session, this means the GBP, EUR, and CHF are all typically the most active during the London session. The New York trading session The New York trading session gets underway at 800am EST, this is just about the time traders in London are getting back from their lunch breaks, and it also signals the start of what is on average the most active time period for forex trading from 8am EST to 12pm EST.

• Between 8am EST and 12pm EST there is high liquidity as the London and New York sessions overlap. • The majority of all economic reports are released around the start of the New York trading session since both Europe and New York are open at this time. All USD and CAD economic news comes out during or near the New York trading session.

• About 85% of all forex trades involve the U. S. dollar, so any currency pair involving the USD has the potential to make a big move during the New York trading session. • After European markets close, volatility and liquidity tend to die down during the late-afternoon New York trading session. • The New York close is very important as it marks the end of the forex trading day, it is important that you use New York close charts because many price action setups form as the trading day comes to an end. If you have no time constraints or you have a job that allows you to get on the internet and check the charts periodically, the best time to trade is from 800am to 1200pm EST during the New York and London session overlap. Both the London and New York trading sessions are excellent times to trade overall, so no matter where you live in the world you should be able to find a time that works with your schedule.

However, you can trade successfully purely off the daily charts, and it is also a much more stress-free way to trade, this means you can check the charts around or shortly after the New York close each day at 5pm EST. If you employ my “set and forget forex trading strategy” on the daily charts, you will only need to check the market once or twice a day for a short period of time. The Asian trading session tends to be the least volatile, so if you are looking for big moves to occur, you are likely going to be waiting until trading gets underway in London around 3am EST.

Sundays are typically not worth trading because movement is very low and nothing significant has happened yet to set the currency pairs in motion. The best days to trade based on average daily trading ranges for the “majors” are Tuesday, Wednesday, and Thursday, Friday can be good to trade too up until about 12pm EST when London closes. Monday typically sees lower average trading ranges for the majors, but this doesn’t mean you should avoid trading on Monday, it just means it is statistically less likely that there will be large forex price movements on Monday than the other weekdays.

Remember, being a price action trader means that you need to pay most of your attention to learning to spot high – probability price action trading setups in the Forex market. In the end, what really matters is obtaining a high quality Forex trading education in price action analysis, this way you won’t really need to concern yourself with analyzing economic reports and the thousands of variables that contribute to FX price movement each day. If you want to learn how to trade the Forex market with a handful of simple yet effective price action forex strategies, check out my price action trading course. Nial Fuller is considered a leading ‘Authority’ on Price Action Forex trading strategies. If you want to learn more about harnessing the power and simplicity of Price Action Trading Strategies please visit Nial Fuller’s Forex Trading Course & Traders Community Page Here.

Nial’s Students get lifetime access to all of his advanced price action Forex Courses, video lessons, webinar tutorials, daily trade setups newsletter, live trade setups discussion forum, traders support line & free ongoing course updates. For more information visit the Forex Course page here. Trading Market Hours.

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Forex Trading Hours and Market Sessions. Forex is a decentralized market that operates through financial centers around the world. Since these financial centers are located in different time zones, traders can enjoy a seamless 24-hour trading environment through retail brokerage firms, like FXDD. Trading begins every Sunday during the Asian session at 500 PM ET and ends on Friday at 400 PM ET. The eight largest financial centers in the world are the United Kingdom, United States, Japan, Singapore, Switzerland, Hong Kong, Australia, and France.

While there are other financial centers scattered across the globe, the trading times of these centers are lumped into three sessions known at the Asian, European, and North American sessions. After the weekend, liquidity returns to Forex during the Asian session. The market is operating through financial centers in Japan, China, Australia, New Zealand, and Russia at this time, among others. The most traded currencies during this time is the Japanese yen. The most volatile pairs during this session include the GBPJPY, GBPCHF, USDJPY, and AUDJPY.

Fundamental forces play into these pairs' volatility, with major new releases coming from Japan, Australia, New Zealand, and China. This session operates through a number of major financial centers, including Paris, Frankfurt, Zurich, and London. London is the largest financial center in the world, trading nearly 30% of all Forex transactions. With such a heavy trade volume, the European Session experiences some of the largest moves in the market. The most active currencies in this session are the GBP, EUR, and CHF. The GBPCHF continues to be a volatile pair throughout the European Session, competing with GBPJPY, and USDCHF. North American Session.

The North American Session is dominated by U. S. transactions, with contributive trades coming from Canada, Mexico, and South America. Volatility hits its peak in New York City, where fundamental factors drive the USD and CAD. Since nearly 85% of all Forex trades involve the USD, this session has been known to generate tremendous moves in the market. The United States dollar is the most commonly traded currency in the Forex market, accounting for most of the liquidity and can be the most volatile. Discovering the differences in price movements among the most traded currencies can help traders take advantage of swings in the market based on news, economic indicators and technical analysis.

You can learn the basics of technical analysis versus fundamental analysis or find out more about which economic variables impact Forex markets here. You can keep time zones in mind when actively trading to take full advantage of the best changes in buying and selling sentiment for currency pairs you’re actively following. As always, risk is a possibility in the Forex market. © 2017 FXDD, Newport Tower, 525 Washington Blvd #1405, Jersey City, NJ 07310. HIGH RISK WARNING Foreign exchange trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance.

You could lose some or all of your initial investment do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions. ADVISORY WARNING FXDD provides references and links to selected blogs and other sources of economic and market information as an educational service to its clients and prospects and does not endorse the opinions or recommendations of the blogs or other sources of information. Clients and prospects are advised to carefully consider the opinions and analysis offered in the blogs or other information sources in the context of the client or prospect's individual analysis and decision making.

None of the blogs or other sources of information is to be considered as constituting a track record. Past performance is no guarantee of future results and FXDD specifically advises clients and prospects to carefully review all claims and representations made by advisors, bloggers, money managers and system vendors before investing any funds or opening an account with any Forex dealer. Any news, opinions, research, data, or other information contained within this website is provided as general market commentary and does not constitute investment or trading advice. FXDD expressly disclaims any liability for any lost principal or profits without limitation which may arise directly or indirectly from the use of or reliance on such information. As with all such advisory services, past results are never a guarantee of future results.

What You Need to Know About Forex Trading. Foreign exchange (forex) trading is buying or selling one currency in exchange for another, in an attempt to extract a profit from the price movements. All currency trades involve two currencies, and trades are facilitated by a forex broker. Currency markets are open 24-hours a day during the week, which is an advantage over the stock market which is only open for a portion of each week day.

The forex industry is not heavily regulated and provides high leverage. This makes it an attractive option for new traders starting out with limited capital (leverage increases the "buying power" of the trader's capital). That said, there are also risks that forex traders need to be aware of, as well some basic information they should know before starting. These articles provide an overview of these crucial basics, including what a currency pair is, currency pair symbols, trading hours, position sizing and pip values, how profits are made, leverage, capital requirements for trading, forex brokers and trading fees. Currency Pairs in Forex Trading. Any forex trade actually involves two currencies. If you are going on a trip to Europe, you take your US dollars and exchange them euros.

That's a currency transaction—exchanging one currency for another. Forex traders do the same thing, except they are attempting to profit from changes in the prices of the currencies. Currencies are always quoted relative to one another, called a pair. For example, the EURUSD is the price of US dollars relative to euros. Forex Trading Isn't a Scam (It Is Complicated, Though) By John Russell. There will be a price associated with the currency pair, and that price will constantly change.

For example, if the price is 1.1000, that means it costs 1.10 US to buy one euro. If the rate was 1.2525, then it costs 1.2525 US to buy one euro. The most heavily traded currency pairs in the world are associated with the US dollar and other major global currencies, including the Japanese yen (symbol JPY), British pound (GBP), Australian dollar (AUD), New Zealand dollar (NZD), Euro (EUR), Swiss Franc (CHF) and the Canadian dollar (CAD). Therefore, the more commonly traded currencies are the EURUSD, GBPUSD, AUDUSD, USDCHF, NZDUSD, USDJPY and USDCAD. Whatever order the currency pair is in reflects how much the second currency costs relative to one unit of the first, as mentioned above. To see how much it costs of the first currency to buy one unit of the second, flip the signs and then divide 1 by the price. For example, if the price of the USDCAD is 1.20 that means it costs 1.20 Canadian to buy 1 US dollar.

If we flip this around to CADUSD, we can see how many US dollars it takes to buy one Canadian dollar. Divide 1 1.20 = 0.8333 it takes 0.8333 US dollars to buy one Canadian dollar. All other global currencies also have symbols. Any symbol can be combined with another symbol to create a pair. That pair will then have a price based on how much of one currency it costs to buy the other.

Trading Hours for the Forex Market. The forex market is open 24-hours during the week, this is because there is always a global market open somewhere in the world. Starting on Sunday evening (in the US) the Asian markets open, followed by the European markets and then the NorthSouth American markets.

Is the Amero the Currency That Will Replace the Dollar? By John Russell. This process continues throughout the week until the US market (and all markets in the same time zone) closes for business on Friday. This means for US traders, there is continuous trading from Sunday night to Friday afternoon. Because of the various global time zones and the 24-hour market, traders often use GMT time. Major global markets include Sydney, Tokyo, London New York. Sydney opens at 2100 GMT, Tokyo at 2300 GMT, London at 700 GMT and New York at 1200 GMT.

Note these times will change by one hour due to daylight savings time. Forex Position Sizes and Pip Values. Currency pairs move in increments called pips.

A pip is the fourth decimal place in the price of a currency pair. For example, in 1.5532, the forth decimal place (2) is worth one pip. If the price moves up to 1.5533, that is a one pip move. Currency pairs are often quoted to five pips. The fifth decimal place is a fraction of a pip. For example, if the price moves from 1.11115 to 1.11120, that represents a half pip (0.00005) move.

Looking at all these numbers can get a bit confusing, but with practice, it becomes much easier to monitor these numbers, especially with the help of a forex price chart. In pairs that involve the JPY, a pip is represented by the second decimal place. For example, if the price moves from 110.25 to 110.26, that is a one pip movement.

The third decimal place, which is often provided, shows fractional pip movements. Pips matter because pip movements determine profits and losses (discussed next). One of the major determinants of those profits and losses is the position size. Most forex brokers allow traders to trade in $1,000 increments (or other units of the currency, depending on the currency being traded). If buyingselling 1,000 worth of the EURUSD, one pip of movement will result in a $0.10 gain or loss. This is called the pip value.

Buyingselling 10,0000 worth of the currency pair will result in a $1 gain or loss for each pip of movement. A 100,000 position means gaining or losing $10 per pip of movement. Discover the Best Times to Trade on the Foreign Exchange.

By John Russell. 1,000 units of currency is called a micro lot, 10,000 worth of currency is called a mini lot and 100,000 is called a standard lot. It is possible to trade in multiple lots, for example a trader could sell seven micro lots, which means a pip of movement will result in a $0.70 gainloss. Unfortunately, these pip values only apply when the USD is the second currency in the pair. For pairs that don't involved the USD, or where the USD is listed first, the pip value will change as the price of the currency pair fluctuates. Pip values can also vary based on the currency deposited into the account (since buying a currency pair with yet another foreign currency means there are multiple transactions occurring). For a full rundown on pip values, see Calculating Pip Values.

How Profits are Generated in Forex Trading. Trading forex takes into account all that we have learned so far. We can buy or sell a currency pair, and whether that price moves in our favor will determine if we make or lose money. The amount of that profitloss is determined by how many pips the price moves, the position size and the pip value. Most forex traders use price charts to help determine which trades they will take.

If they believe that the EURUSD is going to rise, then they will buy the EURUSD. The first currency in the pair is the "directional currency" on the chart. If the EUR is expected to rise relative to the USD, the price on the chart will rise. If the EUR is declining, the chart will show the pair falling. Assume a trader believes the EURUSD, which is currently trading at 1.05250, will rise. They buy one mini lot of that currency (10,000).

The price does rise to 1.05450, and the trader exits. This is a 20 pip gain, and each pip is worth $1. Therefore, the trader made $20 on this trade. If instead the price dropped and the trader closed out the position with a loss at 1.05170, they lost 8 pips or $8 in this case. The EURUSD often moves between 75 and 120 pips per day.

For more examples of profit potential see How Much Money Can I Make Day Trading Forex. Forex prices are quoted with a bid and ask price. The bid is the price you can sell at right now. The ask is the price you can buy at right now. The difference between the bid and ask is called the spread. A large spread is typical of currency pairs that aren't popular or that move a lot each day. Small spreads are typical of heavily traded currency pairs, such as the EURUSD where the spread will often be one pip (or close to it) or smaller.

Paying a spread is a cost. If you buy the EURUSD at the 1.05155 ask price, and then sell right away at the 1.05145 bid price, a pip has been lost without the price even moving. Forex traders use a number of tools and strategies to help them decide when to get into trades, when to cut losses and when to take profits. How Much Forex Leverage? Gains and losses are magnified with the use of leverage. Leverage is borrowing money from the broker to increase the amount of capital available for trading.

Forex brokers typically do not charge interest on borrowed fundsleverage. Let's assume a trader deposits $1,500 into a forex account, and they get 101 leverage. This means the trader can take positions up to $15,000 (or 1.5 mini lots). Let's use the same example as before. Assume a trader believes the EURUSD, which is currently trading at 1.05250, will rise. They buy one mini lot of that currency (10,000).

The price does rise to 1.05450, and the trader exits. This is a 20 pip gain, and each pip is worth $1. Therefore, the trader made $20 on this trade. If instead the price dropped and the trader closed out the position with a loss at 1.0517, the lost 8 pips or $8 in this case. Without leverage our trader (who deposited $1,500) wouldn't be able to take this trade, because it required buying $10,000 of currency to make that $20. But with leverage, the trader can utilize up to $15,000, making the trade possible. The $20 gain represents a 1.33 percent return the $1,500 account. Similarly, if the trader lost $20 their trade capital is reduced by 1.33 percent. If a trader is unleveraged, they must have $10,000 in their account to make this trade.

If they make $20 it represents a 0.2 percent return on account capital. That is much less than the leveraged trader. Of course, if they lost $20, it would be a smaller loss than the leveraged trader as well (in percentage terms). Leverage magnifies gains and losses. It allows traders, who are winning, to build their capital quickly.

The downside is that when losing, leverage will erode capital very quickly. See How Much Forex Leverage? to learn the right amount of forex leverage for you.

Capital Requirements for Trading Forex. We now have enough information to start formulating how much capital we need to trade forex. We need all the above information because it helps to define our risk and profit potential. Forex traders should not risk more than 2 percent on any single trade. Day traders should be risking 1 percent or less. Risk, in this case, is measured as the distance between the entry point and stop loss level (where a losing trade is closed out), in pips.

This is multiplied by the pip value and the position size to attain the dollars at risk on the trade. That amount should be less than 1 percent of the account balance. For example, if a trader is researching EURUSD strategies and finds that they typically will need a 50 pip stop loss, that means they need to risk at least $5 per trade (50 pips x $0.10pip x 1 micro lot). If attempting to only risk 1 percent per trade, this trader needs at least $500 in there account ($5 x 100) because $5 is 1 percent of $500. This is the absolute minimum required for this risk level. If the trader is willing to risk 2 percent on a trade, then they will need to deposit $250 ($5 x 50), because 2 percent of $250 is $5. These sample calculations can be used to determine how much capital is required for the specific forex strategy you are researching.

Whether day trading forex or swing trading, starting with at least $500 is recommended. Starting with $1,000 or more is better, and starting with $3,000+ increases the chances of producing an income. Interest Rate Credits and Debits. Every currency has a home, and those homes (countries or zones) have different economic climates. Interest rates differ across the world and currency traders take part in this. If you buy euros and place those euros in a European bank, you will get a different interest rate than if you buy New Zealand dollars and place them in a New Zealand bank. While forex brokers don't typically charge interest on leverage (discussed above), each night forex traders are debited or credited interest based on their currency positions.

If a trader has bought the NZDJPY pair for example, and interest rates are 3 percent in New Zealand and 0.5 percent in Japan, the trader will receive a small interest payment into their account each day at 5 PM EST. If the trade was held all year, theoretically the trader would make 2.5 percent off the interest payments alone. On the flip side, if a trader sells the NZDJPY, then they have sold NZD in favor of buying JPY, and therefore will be debited every day they hold the position. Over the course of the year, the negative interest rate will cost the trader approximately 2.5 percent.

Note though, that interest rates are subject to change throughout the year. If a trader is leveraged these interest differentials will be magnified. For example, if a trader deposits $1,000 and then takes a $10,000 position (1 mini lot) in this pair, they could see their account grow or decline by approximately 25 percent based on interest from creditdebit alone. This trade requires at least 101 leverage. Also, keep in mind that the price of the actual currency is always fluctuating. On a daily basis, or even on a year basis, the interest creditsdebits are likely to be relatively small compared to the gains or losses based on price movements.

Forex Brokers and Forex Trading Fees. There are forex brokers all over the world. Since the forex market is not highly regulated in certain regions, there are plenty of unscrupulous and ill-run brokers out there. When searching for a forex broker one of the primary things to look for is regulation and longevity.

Ideally, the broker should be regulated in a major market such and the US, Great Britain, Canada, Australia, Japan or New Zealand, to name a few. Brokers with a long track record are preferred over new brokers, as there are always new brokers popping up and many disappear just as quickly. Also, consider what you are personally looking for from a forex broker. Some traders are more concerned with fees and trading costs, while others are more concerned with customer support. One major consideration when choosing a broker is the fees they charge.

Most brokers don't charge fees for their trading platform or for receiving real-time pricescharts. Most brokers do charge a spread though (discussed above). Typically the lower the spread the better. Many brokers only charge the spread, but don't have any other fees. Other brokers may charge a commission, but if they do the spread is usually much smaller. Day traders are typically better off paying the small commission for the reduced spreads, while swing traders and long-term traders should be able to do fine with a typical broker that has slightly larger spreads but no commissions. Commissions and spreads vary by broker.

Compare them, along with other criteria to find a broker that works for you. Final Word on Forex Trading. There is a lot to learn about forex trading. This is just the tip of the iceberg. Dig deeper into each one of these sections to learn more. Before trading real capital open a demo account and trade some fake money. It is one of the best ways to interact with the market and learn, without risking any real capital.