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Trading using Market 24h Clock

Trading volume and volatility change for different currency pairs depend
on the movement of the clock hands. You can trade more effectively, if you
know which currency pairs are in the spotlight at any given time. Timing
plays big role in currency trading.

Since currency market works around-the-clock, trader is able to watch


every market movement attentively and to respond to it in time. In order to
develop successful trading strategy, it is necessary to take into account
changes in the market activity for various currency pairs in different time
periods. It maximizes trading opportunities in your work hours.

In addition currency pairs' liquidity changes with geographical location and


macroeconomic factors. Knowing what time of day one or another currency
pair has the largest and most narrow trading range, you are able to improve
your abilities in capital allocation.

This article examines the average trading activity on major currency pairs
in different time intervals. It will help to determine when currency pairs are
most volatile.

This chart presents data on the average range in pips for the different
currency pairs in different time periods:

Asian session (Tokyo) 00.00-09.00 UTC

Trading activity in Asia is conducted in major regional financial hubs.


During the Asian trading session, Tokyo takes the largest market share,
followed by Hong Kong and Singapore.
Despite the flagging influence of the Japanese central bank on the forex
market, Tokyo remains one of the most important dealing centers in Asia.
It is the first major Asian market to open, and many large participants often
use the trade momentum there as the benchmark to gauge market,
dynamics as well as to devise their trading strategies.

Trading in Tokyo can be thin from time to time; but large investment banks
and hedge funds are known to try to use the Asian session to run important
stop and option barrier levels.

Following figure provides a ranking of the different currency pairs and


their ranges during the Asian trading session. For the more risk-tolerant
traders, USD/JPY, GBP/CHF, and GBP/JPY are good picks because their
broad ranges provide short-term traders with lucrative profit potentials,
averaging 90 pips.

Foreign investment, banks and institutional investors, which hold mostly


dollar-dominated assets, generate a significant amount of USD/JPY
transactions when they enter the Japanese equity and bond markets.
Japan's central bank, with more than $800 billion of U.S. Treasury
securities, also plays an influential role in affecting the supply and demand
of USD/JPY through its open market operations.

Last but not least, large Japanese exporters are known to use the Tokyo
trading hours to repatriate their foreign earnings heightening the
fluctuation of the currency pair. GBP/CHF and GBP/JPY remain highly
volatile as central bankers and large players start to scale themselves into
positions in anticipation of the opening of the European session.

For the more risk-averse traders, AUD/JPY, GBP/USD, and USD/CHF are
good choices because they allow medium-term to long-term traders to take
fundamental factors into account when making a decision.

European Session 7.00-16.00 UTC

London is the largest and most important dealing center in the world, with
a market share at more than 30 percent according to the BIS survey.

Most of the dealing desks of large banks are located in London; the majority
of major forex transactions are completed during London hours due to the
market's high liquidity and efficiency.

The vast number of market participants and their high transaction value
make London the most volatile FX market of all.

As shown in Figure (see below), half of the 12 major pairs surpass the 80
pips line, the benchmark that we used to identify volatile pairs with
GBP/JPY and GBP/CHF reaching as high as 140 and 146 pips
respectively.

High volatility for the two pairs reflects the peak of daily trade activity as
large participants are about to complete their cycle of currency conversion
around the world. London hours are directly connected to both the U.S. and
the Asian sessions: as soon as large banks and institutional investors are
finished repositioning their portfolios, they will need to start converting the
European assets into dollar-denominated ones again in anticipation of the
opening of the U.S. market. The combination of the two reconversions by
the big players is the major reason for the extremely high volatility in the
pairs.

For the more risk-tolerant traders, there are plenty of pairs to choose from
EUR/USD, USD/CAD, GBP/USD, and USD/CHF, with an average range of
80 pips, are ideal picks as their high volatilities offer an abundance, of
opportunity to enter the market. As mentioned earlier, trade between the
European currencies and the dollars picks up again because the large
participants have to reshuffle their portfolios for the opening of the U.S.
session. For the more risk-averse participants, the NZD/USD, AUD/USD,
EUR/CHF and

AUD/JPY, with an average of about 50 pips, are good choices as these pairs
provide trader with high interest incomes in additional to potential trade
profits. These pairs allow investors to determine their direction of
movements based on fundamental economic factors and be less prone to
losses due to intraday speculative trades.

U.S. Session 13.30-20.00 UTC.

New York is the second largest FX market place, encompassing 19 percent


of total FX market volume turnover according to the 2004 Triennial Central
Bank Survey of Foreign Exchange and Derivatives Market Activity in April
2004 published by the Bank for International Settlements (BIS). It is also
the financial center that guards the back door of the world's FX market as
trading activity usually winds down to a minimum from its afternoon
session until the opening of the Tokyo market the next day. The majority of
the transactions during the U.S. session are 51 executed between 8 a.m. and
noon, a period with high liquidity because European traders are still in the
market.

For the more risk-tolerant traders, GBP/USD, USD/CHF, GBP/JPY, and


GBP/CHF are good choices for day traders since the daily ranges average
about 120 pips (see Figure).
Trading activities in these currency pairs are particularly active because
these transactions directly involve the U.S. dollar.

When the U.S. equity and bond markets are open during the U.S. session,
foreign investor have to convert their domestic currency, such as the
Japanese yen, the euro, and the Swiss franc, into dollar-dominated assets in
order to carry out their transactions. With the market overlap, GBP/JPY
and GBP/CHF have the widest daily ranges.

Most currencies in the FX market are quoted with the U.S. dollar as the
base and primarily traded against it before translating into other
currencies. In the GBP/JPY case, for a British pound to be converted into
Japanese yen, it has to be traded against the dollar first, then into yen.
Therefore, a GBP/JPY trade involves two different currency transactions,
GBP/USD and USD/JPY, and its volatility is ultimately determined by the
correlations of the two derived currency pairs. Since GBP/USD and
USD/JPY have negative correlations, which means their direction of
movements are opposite to each other, the volatility of GBP/JPY is thus
amplified. USD/CHF movement can also be explained similarly but has a
greater intensity. Trading currency pairs with high volatility can be very
lucrative, but it is also important to bear in mind that the risk involved is
very high as well. Traders should continuously revise their strategies in
response to market conditions because abrupt movements in exchange
rates can easily stop out their trading orders or nullify their long-term
strategies.
For the more risk-averse traders, USD/JPY, EUR/USD, and USD/CAD
appear to be good choices since these pairs offer traders a decent amount of
trading range to gamer handsome profits with a smaller amount of risk.
Their highly liquid nature 53 allows an investor to secure profits or cut
losses promptly and efficiently. The modest volatility of these pairs also
provides a favorable environment for traders who want to pursue long-term
strategies.

U.S. - European Overlap 13.30-16.00 UTC

The Forex markets lend to be most active when the hours of the world's two
largest trading centers overlap. The range of trading constitutes on average
70 percent of the total average range of trading for all of the currency pairs
during the European trading hours and 80 percent of the total average
range of trading for all of the currency pairs during U.S. trading hours. Just
these percentages alone tell day traders that if they are really looking for
volatile price action and wide ranges and cannot sit at the screen all day,
the time to trade is the U.S. and European overlap.

European - Asian Overlap 07.00 –09.00 UTC

The trade intensity in the European-Asian overlap is far lower than in any
other session because of the slow trading during the Asian morning. With
trading extremely thin during these hours, risk-tolerant and risk-loving
traders can take a two-hour nap or spend the time positioning themselves
for a breakout move at the European or U.S. open.
This article is written using "Day trading the Currency market" by Kathy
Lien

Strategically important moments of the trading day

UTC/GMT; DST (Winter time)

Sunday 21:00 (22:00) - Opening of the Trading


rollback after Friday; better to watch the terminal

21:00 DST (22:00) - opening of the trading session in Wellington (New


Zealand) nothing happens, the trading is slack.

23:00 DST (24:00) - opening of the trading session in Sydney, the trade
becomes more brisk in anticipation of Tokyo trading session opening in an
hour.

Before Tokyo freely two transactions can be made (to both sides; with profit
5-10 pips)

24:00 - Tokyo trading session opening, trade surges. It is worth to take into
account corporate relations between Asian investors. They operate
smoothly and clearly, and if going in one direction: all at once.

01:00 - Singapore session opening; the trade surges in anticipation of two


big stocks' opening - in Shanghai and Hong Kong. Right before the Chinese
session Euro declines usually until the opening of Shanghai and Hong
Kong.
01:00 - 01:30 - Euro declines until Chinese Session, but there can be
exceptions from time to time. Be careful.

01:30 - Shanghai and Hong Kong Session opening. Usually begins large-
scale trade in the whole Asian-pacific region

About China Alone

(Shanghai and Hong Kong working hours concur)


A structure of Chinese export is such that most part of articles is paid in
dollars, so it is logical to suppose that China has no need in additional
dollars. That is why there is usually EUR/USD growing during Chinese
session.
China is one of possessing largest gold and currency reserves countries on
the planet. If china would be going to sell some part of its dollars, there
would be enough panic for Euro to grow up. In addition, China is the
biggest lender of United States.
It seems that it would be unprofitable for China to get rid of the dollar and
threats to diversify foreign exchange reserves are mostly speculative.

Pay attention to China and its actions.

If Chinese are buying the dollar - the whole day will be like a casino.
If they are buying euros - all is predictable.

01:30 - 02:30 - euro is grows usually during this hour

02:30 - 06:00 - transactions may be in different directions on the


EURUSD; Asian exporters convert part of their profits both in dollars and
Euros

06:00 - Tokyo Session closing; if Euro did actively sink till this moment,
then after Tokyo Chinese drive Euro up.

06:00 - 07:00 - figuratively speaking is "Chinese hour" on market; Chinese


and Singapore take matters into their hands. Euro grows usually.

Asia is enormous commercial and industrial region, with the abundance of


high quality and inexpensive goods, gigantic finances at the back; there are,
respectively, many transactions on stock exchanges.
So transactions and rates at the opening of LONDON Session should be
monitored after the trade ending in the Asian region.

07:00 DST (08:00) – opening of London Stock Exchange and other


European Exchanges. Observations show that usually within first hours
sales of Euro are dominating.

09:00 - Singapore and Asian Session closing. Almost immediately or within


an hour is spurt of Euro or change of trend (usually) till 11:30; no one
bothers Europeans.

10:00 - 10:30 - often there is a change of trend in the European session;

11:00 - 13:00 - completion of the trade cycle in oil trading floors of Dubai,
Qatar, Emirates and etc.; it seems that they, too, have no need in dollars
since the oil trading is in dollars. So, most often, Euro grows up;

Worth of noting are last hours of trading floors in the Middle East. It is an
oil region, exchanges don't work for long, but volumes are not small, with
plenty of petrodollars; it can be assumed that they had no reason to buy
dollars.

13:00 - 13:30 DST (14:00 - 14:30) - it is time to close all unsafe positions in
anticipation of the upcoming American outrage or to set block to prevent
losses. Euro sinks usually before American Session.

Within 13:00 and 13:30 DST UTC/GMT (14:00 and 14:30) are confusion
and Fuss before the opening of three major stock exchanges - New-York's,
Toronto's and Chicago's. It is time to safeguard your positions!

13:30 DST (14:30) - opening of U.S. and Canada stock exchanges; European
session is still opened. At this time comes the large-scale, hard-predictable
trade. Don’t try to treat news; pure speculation; trends are formed quickly;

13:30 DST (14:30) - U.S. is leading within these hours. It is unreal to


predict the direction of trend. Nearer to the closing of London, Zurich and
Frankfurt already formed the trend often changes to the opposite direction.

15:30 DST (16:30) - Closing of the European Session. Often Euro trend
changes rapidly.
19:00 - 20:00 DST (20:00 - 21:00) - Last working hour of U.S. Session.
Former trend often resumes till 20:00 - 20:30 DST (21:00 - 21:30);

First and the last working hours of almost every exchange are surge in
activity time of institutional clients with a lot of money and of very large
funds. But this surge doesn't mean that they do nothing within the session.
They analyze the situation. Transactions occur within these first and last
hours. This allows predicting price movements at the opening and closing
of major stock exchanges.

Make transactions before exchanges' opening (before 1 - 2 min)

Within first night hours there is usually a rollback on EUR/USD down till
Tokyo opening.

On Friday mass hit of stop-losses occurs

Friday 21:00 GMT / UTC - closing of the trade