What is a “good” time to trade fore
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Here we will be going to take a look what are the best months of the year and the best days of the week to trade forex. The foreign exchange market is open 24 hour for 5 and a half (Sunday) days a week around the whole year. But there are certain times when it is more attractive to trade.
Best Months to Trade
The worst months for trading are certainly the summer months of June (second half), July and especially August. Many institutional traders in Europe and North America are on vacation which results in less trading activity in general, drying up of trading volume and smaller swings in currency pairs.
If you trade during the summer months you will have to take into consideration that prices will be range-bound for a long time and get rather unpredictable. Starting in September – usually after Labor Day in the US – trading activity picks up again as traders return to their desks. Then the best three months of the year follow until volume dries up again in the second half of December as traders take extended Christmas holidays. From January until May it is also very good to trade as we usually witness good swings during these month
Just be very cautious during the summer period and during the second half of December. What normally works in “normal” conditions might not work during these low volatility month
Best Days to Trade
While the Forex market already opens on Sunday evening Central European Time (Monday morning in New Zealand and Sydney) it is not recommended to start your trading week on Sunday already. Unless there was major news over the weekend there won’t be much going on as volumes and volatility are usually at an extreme low on Sunday evening
Monday can also be very difficult to trade as many traders – especially in Europe – wait for economic news and macro data before they put up new positions. Trading ranges on Monday are usually smaller on average compared with the other days of the week. Tuesday, Wednesday and Thursday are considered to be the best days of the week for forex trading. These three days are usually the days which get the most action. If you want to trade only three days a week and spend the rest of the week at the beach you should chose these three day
The first half of Friday is also pretty decent for trading but please be aware that volumes dry up in the second half of the day as traders head for the weekend. Be also aware of the fact that on Friday trends which have persisted for the whole week can be reversed on Friday’s as traders close their positions to avoid the weekend risk. You should be especially cautious on the first Friday of each month as this is the day when the non-farm payroll report from the US is due. This data usually leads to erratic swings in all major currency pairs, especially in the dollar related pairs
If there is a holiday in more than one major financial center such as Easter Monday or Christmas we usually also witness a drying up of volumes and sometimes erratic swings. Be especially careful on these major holidays as most of the big traders are off their desks. If you avoid these low volatility days you will usually diminish potential frustration and boost your performance.