Important Times To Remember in FX Trading – Volume & Volatility

Volume and volatility often follow a particular pattern during the day which can help you better understand price action at certain times.
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An experienced currency analyst that specialises in short term sentiment and news driven trading.
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FX Trading – Volume & Volatility

We just have a quick question here from Primbam asking whether it’s okay to take a trade an hour or two before the actual London open if sentiment provides an opportunity? Should we rather wait for the London or the New York open before we execute a trade?

So firstly thanks for the question Primbam. It might be a good chance with this video is just quickly run over a few of the most important times we need to keep track of every day as Forex traders.


What Is The London Fix? What Volatility Impact Does It Have On Currencies?

How Do Different Trading Sessions Affect The Risk Tone?

What Is The Best Session To Trade?

Now the first increase that we normally notice in terms of volume usually recurs around the London open, which is 8 a.m. UK time. But if there is a strong driver from the Asia Pacific session or maybe the prior days and New York trading session, then it won’t be strange to see volume pick up slightly before the the actual open, especially as some of the futures market start to open up around about 7 a.m. UK time.

So to your question whether you can consider jumping in an hour or two before the actual open. If There is a clear sentiment and a reason for the market to want to trade it, you can certainly jump in before the actual open takes place.

If there’s a reason for traders to get to the desk early, and trade in line of that particular drivers then you can often see an increase in volume before the actual open takes place. So of course at the cash open at 8 a.m. UK time, it’s always good to just be wary of the potential increase in volume and the price action fluctuations that you might see.

It’s also important from an equity point of view, and how we can affect Forex traders. For example, at the cash open, it’s usually a time where you might observe some head fakes in equities as pre market orders and clash with new orders coming into the market.

You might see equities rise and fall quickly and then basically reverse some of the train so always keep that in mind. If you’re trading a strong risk on or risk off tone and equities has been moving up or down you might see a head fake in the opposite direction at the at the open so always just something to be wary of.

Then the other important time to watch would be the UK lunchtime, usually between 11:30 a.m. and one o’clock UK p.m. time. And keep in mind that these sessions are usually more tapered, and but you might have some early risers from the New York session, which would also be getting to the desk around about that time.

So if there is a very important massive symptom and driving place, just like some of the London traders might get to the desk a little bit earlier. This is also the time where you might see some North American traders also into the market. And apart from that, we can also look at the New York open itself which usually kicks off another bout of increased volatility as we get us data normally at around 1:30 UK time. And then that is also followed by the actual New York cache open at 2:30 UK time.

We can also of course see another bout of flows entering the market. Now after this we do have the New York fix fixed normally at 3 p.m. UK time and the London fix at 4 p.m. UK time. Which can see another wave of volatility. Apart from the regular transactional flows at the fix, it might also see some additional flows due to massive option expires. So definitely a time to be aware of that you might see some price action swings and volatility coming into the market.

Then after the fixed you of course have the London close at 4:30 UK time where we usually see a big drop off in volatility. The reason for this of course is because of the bulk of the daily trading volume usually occurs during the London session. I think the numbers is about 40% of total trading volume which only occurs during the London session compared to something like 20% during the North American session, so a lot more volume during the London session and once the cash up and closes for London that obviously sees a reduction in volatility.

So when London closes, we usually see that drop off in active participants. And now a great time in the market is of course those couple of hours where we have the overlap between the New York and London trading sessions. And but as you well know, just because there’s more volume and more volatility doesn’t always translate into more profitable trades.

Of course, the best times to trade is still when you have a clear fundamental or sentiment driver in play to take advantage of whether that is early in the age of taxation just before an open just after an open. Once there’s a clear catalyst to trade and you can basically enter at any time.

Once you see you know, the the type of entry setup that you want to take from a technical point of view, of course, if it’s a unscheduled event and it’s a massive market move and then you can, of course just jump in at any time when it occurs. But if it’s an ongoing sentiment, like a risk on tone that carries on from the OSHA back to London, you can certainly consider taking that trade even before the actual London open.

So Primbam, I hope that helps. Any other questions don’t hesitate to let us know.


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