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One of the goals of the trader is to find the best time of entry and exit for his transactions. Very often, finding the right time can determine whether the operation will be in progress or not. Markets are constantly changing and it is very important to understand how they work.
Of course, there is no such thing as a sure-fire way to always know the right time to trade, as the markets can be quite unpredictable. However, it is possible to study the markets and learn more about its models and modes of operation in order to find the right time to trade.
Follow the stock market sessions
Financial markets operate 24/5. When trading stops on one side of the world, traders on the other side are just starting their day. In this way, trading sessions follow each other and overlap, creating potential opportunities for traders.
Traditionally, traders follow the 3 peak trading sessions – the European, Asian and North American sessions. They are also called London, Tokyo and New York sessions, depending on the financial centers of each.
The highest activity in the markets is observed when business is carried out in these three regions, since most banks and companies conduct their daily activities there. Let's take a closer look at these trading sessions.
1. The Asian session
It starts at 23:00 GMT and continues until 8:00 GMT. The Asian session includes Japan, but also countries like China, Australia and New Zealand, so the duration of this market session extends beyond Tokyo hours. The Asian session can determine the trend for the other sessions that follow it, so it may be important to pay attention to the events taking place during these hours. As it is the Asian market that is concerned, currency pairs with the JPY, for example, can increase in volatility.
2. The European session
One of the main features of the European session is that it overlaps the Asian session in the morning and the American session in the evening. It starts at 7:00 GMT and continues until 16:00 GMT. This time zone concerns several major financial markets, including London, Frankfurt, Paris and Moscow. The most popular currency pairs during this period can include, for example, GBP and EUR, and volatility generally increases.
3. The American session
The New York trading session includes not only the United States, but also Brazil, Mexico and Canada. It lasts from 12:00 GMT (noon) to 20:00 GMT. The overlap of US and European markets makes prices more dynamic in currency pairs, for example EUR / USD, due to increased trading activity.
Understanding the timing of different trading sessions is essential to planning a trading strategy. High volatility can contribute to the results of a day trader, but it also increases risks. The trader must be attentive to the market situation and adapt his actions accordingly.
Pay attention to important news
Tracking trading sessions may not be enough, as it is important to understand the sources and reasons for the increase or decrease in asset volatility. Traders can check the news and use the economic calendar to spot these opportunities.
These reasons can be regional and national economic factors, such as the key rate and fiscal policies, the rate of inflation, the non-farm wage bill, etc. Major weather events, protests or a new Twitter message from the President of the United States – all of these can have a big influence on the market.
A big picture and the ability to link events can help traders plan their trades more efficiently.
There is no right answer to the question "when is the best possible time to trade" because it depends on many things. The answer to this question may be different depending on the trading approach you take, when you trade and the target market. Following the market and checking the news can be a very useful habit for both novice and experienced traders.
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Source: IQOption blog (blog.iqoption.com) 2020-07-20 08:33:40
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