A complete newbie in Forex trading? Well this Best Times to Trade Forex Pairs in GMT article is going to help you! Forex simply refers to Foreign Exchange and Forex Trading means trading in different currencies from different countries against one another. A Forex market is a place where currencies are traded, it is the largest market in the whole world. On an average, over $5 trillion are traded in the Forex market. You can buy and sell currencies 24 hours for five days a week. Trading is always done in pairs and if you want to be successful, you must have the knowledge about the best times to trade Forex pairs.
Best Times To Trade Forex Pairs In GMT
How does Forex Trading Work?
Different currencies go through a lot of highs and lows at different times and thus there is a lot of risks involved in Forex trading. On one hand, you will be buying a currency while you will also be selling another currency from the other hand. This is the reason why currencies are often represented in pairs- EUR/USD or USD/INR. Let’s take an example of EUR/USD. It refers to the number of USD one EUR can buy. Here, EUR is the base currency while USD is the counter currency. If you think the value of USD will increase in terms of EUR, then you invest your money to buy some USDs with Euros. When the exchange rate increases, you can sell the USDs back and make your profit.
This is the basic working of Forex trading but you must know that a lot of risks is involved in foreign currency trading. There are a lot of factors to be considered before you decide to put all your money in Forex market. The level of experience, investment objectives and the amount of risk you can take are some of the factors that you need to consider before deciding to trade here. The Forex marketplace is completely dependent on the Exchange Rate and hence, you need to know about the best times to trade Forex pairs.
Types of Forex Trading
Forex marketplace deals with all types of currencies from the world. The trading takes place electronically over-the-counter. Unlike other trading centers, Forex market remains open 24 hours in a day. When the market in Japan closes, the market in the US opens up. So, the market is always open. But this does not mean that you can invest at any time of the day and still make a profit. No, that does not happen here.
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Remember, there are a large variety of investors in the market. Anyone from banks, governments, companies, hedge funds, investors to individuals can invest in Forex, not to forget the retail Forex traders. There are three ways of trading- spot market, forwards market, and futures market. Spot Market is the place where currencies are bought or sold according to the current price. Forwards and Futures market trade are that claim to represent a certain currency over a future date that is pre-decided.
When To Trade?
If you are new to Forex trading, you should know about the best times to trade Forex pairs. Since the trading of currencies is always done in pairs, the best time to trade is completely dependent on the Forex pair you are going to trade in. The market is open all the time but there are different sessions in a day- the American session (also known as New York session), the European session (also known as the London session) and the Asian session (also known as Sydney or Tokyo session).
A Forex pair is most active when both or at least one of the markets associated with it is open. For example, EUR/JPN will be most active when either both American and Japanese markets are open or one of them is open. When none of them are open, this pair is likely to remain quiet. Also remember that there are no sessions over the weekend. But you have to keep the time difference in mind when you start trading.
Every trader has his own strategy. The best time to trade is also dependent upon your strategy of trading. If you are a trader that prefers high volatility, you must trade at a time when all major markets are open. But if you are a trader who prefers less volatility, you may want to trade during the quieter hours.