The forex market can be divided into four main trading sessions: New York session, Tokyo session, London session, and Sydney session. During these sessions, the volatility of the market changes in some of the forex currency pairs. Usually, when a session opens or closes that’s related to the currency pair, the volatility gets affected too.
The busiest session in the forex market is the London session. This could help you determine which trading session, you should trade. But there are other factors that can help you with choosing the best days to trade the forex market. This article will guide you when you should not trade, which are the most volatile days, etc.
Avoid trading during important events
Finding the best days to trade the forex market can be not easy, and dependable on different factors. As a trader, you open trades based on your technical analysis on the forex currency pairs. By doing the technical analysis part, you can find setups on the foreign exchange market and trade the currency pairs. But checking the day of the week on the forex market is very important.
Let’s say you have analyzed a currency pair that you think can be successful and the day of the week is Friday. The foreign exchange market usually closes on Friday afternoon and opens on Sunday or Monday depending on the forex trading sessions. By holding your trades during the weekend you may risk ending your trades in losses for two reasons.
The first reason it has to do with the events that can happen during the weekend. Usually, you check the economic calendar to make sure there are no upcoming economic events (news) that have a lot of impact on major currency pairs. And after confirming that there are no upcoming economic events at the weekend, you leave trades open as it doesn’t show any risk.
But on weekends with your trades open still, you can’t close or change the stop loss level as the foreign exchange market is closed. And at weekends if any major events happen it could reflect your trading balance. For example, any update from leaders of the major countries can affect the currencies. During the weekend, any government actions can affect currency pairs.
Or in situations, such as oil “conflicts”, tariffs in other countries, etc, it can affect the currencies in an unexpected movement. And since you can’t close your trades during the weekends, your trades can be hit with a huge loss. It’s always recommended to close your trades during the weekends to avoid any unexpected movement in the financial market.
Avoid trading on the weekends (Gaps)
Holding your trades during the weekend can be risky when the foreign currency market opens. Usually, most of the currency pairs open the first seconds of the market with gaps. Gaps are empty spaces because the market during the gaps doesn’t create any candlestick. And when gaps occur, the price can move down or up without creating any candlesticks. Most of the gaps occur during the opening of the forex market, on short timeframes with one minute.
And if you keep your trades open, the gaps can affect your trades too. Even if you have a stop loss on your trades, the power of gaps will affect your stop loss. Usually, the stop loss gets executed immediately at your price level with 1-2 pips difference. But during the gaps, your stop loss can be executed after 50, 100 pips or more.
Closing your trades during the weekend can help you protect your trades. If you spot any trade setup in the market during Friday, it’s better to wait and open your trades on Monday or Sunday when the market opens.
Trading on Friday doesn’t mean you should not trade at all, because if you open and close the trades before the market closes, then you don’t risk your account. But holding the trades open during the weekend, can lead to ending your trades on losses during the opening of the market with gaps.
Best days to trade Forex
As we mentioned above, the most traded session is the London session. But that doesn’t mean you should trade only with the London session. There are other sessions such as the Asian session, New York session, Sydney session, etc. Usually, when the forex markets open on Sunday or Monday depending on the trading session, the market volatility is low.
Because the first hours of the market don’t have high volatility in the financial market. But the market starts to become more volatile on the following days:
During these 3 days, it’s the best time for you as a forex trader to can identify potential trade setups on the market.
Forex currencies as British Pound, Euro, Australian Dollar, New Zealand Dollar, Swiss Franc, Hong Kong Dollar, Japanese Yen, etc, start to be more intense on the volatility. And because the forex market is more volatile, price action such as (market patterns, trend lines, etc), starts to appear more often in the market.
But because these are the best days to trade forex, it doesn’t mean you should not trade other days. If you identify a potential movement in the market, during the opening of the market, you can trade it as there’s nothing wrong.
But waiting for more hours so the market spreads can lower is essential. During the opening of the market, the spreads are higher than usual, but they start to tighten and go back to normal after some hours.
And trading after spreads is more competitive than you can enter on your trades. Another day that traders mostly avoid is Friday. This is the day when the market closes and it can be risky to hold your trades during the weekend. Even that Friday has a lower volatility momentum, traders can scalp during currency pairs during the Friday.