When Should You Trade?
Now one of the goals of any trader is to discover and then use the best entry point and then exit at the right time. In 80% of the cases finding the right time to enter determines how much money you will make. However, as easy as it may sound, the ever-changing markets make it challenging to find the optimal entry and exit points.
As seasoned traders, we understand that there is no single surefire way to know the best time to trade because if anything, we’ve learned that markets are unpredictable. However, as challenging as it may be, it is still possible to study the markets and find patterns, to find the best time to trade.
Following Trading Sessions
One of the best things about the financial markets is that they are always on 24/5. When a trading day ends in one part of the world, it is only the start in the other. Trading sessions also overlap each other, which creates brilliant opportunities for trades of all types.
Most traders will follow just 3x trading sessions with peak activity. Generally, it is the North American, European, and Asian trading markets that are followed. In particular, they tend to be Tokyo, New York, and London sessions.
When business is conducted in these regions, that’s when there is the most activity, since almost every bank or corporate entity will conduct their business in these markets. That being said, let’s examine trading sessions more closely.
Asian Trading Session
The trading session in Asia, aka Tokyo, starts at 23:00 GMT and runs till 8:00 GMT. While the Asian session mainly includes Japan, but it also includes New Zealand, China, and Australia. That’s why the timeline for the session extends slightly beyond Tokyo’s trading session.
It has been observed that the Asian session may set the trend for other sessions that follows it. That’s why many seasoned traders know that they should pay attention to the events during these sessions. Assets like currency pairs, especially where the JPY is involved, will fluctuate.
The European Trading Session
The European session tends to overlap somewhat with the Asian session and also the session in America. In Europe, the markets open up at 7:00 GMT, and the trading session will last till 16:00 GMT. The time zone has multiple markets, including Moscow, London, Paris, and Frankfurt. The popular currency pairs or assets include the EUR and GBP. Generally, volatility increases during these sessions.
The American Trading Session
The American exchange and trading session does not just include North America, but also countries like Canada, Brazil, and Mexico. The session starts at 12:00 GMT and will run till 20:00 GMT. Since as mentioned above, the European and American markets tend to overlap; it makes for more dynamic price fluctuations, especially for the EUR/USD currency pair.
It is important to understand the timings of each trading session and factor that into your trading strategy. The high volatility will contribute to gains, but it can also be attributed to losses. Traders need to keep a close eye on the situation and then adapt their strategy accordingly.
Keep an Eye on the News
We often tell people that following the trading sessions isn’t enough. It isn’t as important as understanding the underlying reasons for the decrease and increase in asset volatility. Traders should check the news and use their economic calendar to spot these instances.
Out of the many reasons, there could be national economic, regional tax policies, non-farm payroll, inflation rate, etc. Furthermore, there may be significant weather events, political turmoil like protests, or even a tweet by the President of America, that can influence the market.
It is important to see the bigger picture, and then make the right connections as that will help traders plan their deals accordingly.
We conclude by saying that there is no right or wrong time to trade. Furthermore, there isn’t the best time to trade either. It depends on many different components. The answer to this question will vary depending on your trading approach, the market being targeted, and the timeframe. So, you will want to follow the market and make sure to check the news so that you are updated with the latest developments.
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