It is estimated that 90% of the Forex trading volumes are generated by speculators (day-traders)..
The Forex Market is a decentralized OTC (Over-the-Counter) financial market operating 24 hours per day (Monday-Friday) using the electronic network of banks (ECN). It is estimated that the Forex turnover today may exceed 5 trillion dollars per day.
What is Forex Trading
Forex or else FORex EXchange is an electronic network that enables the exchange of global currencies, one for another. Currency pairs are exchange mechanisms used for the global trading of goods and services. Importers and exporters, large corporations, investors, and banks are only some of the participants in the Forex Market. The Forex market operates like the internet, it is not centralized, and it exists in the electronic network of banks, which is called the ECN network. Forex is a huge market with a daily activity turnover worth more than 4 trillion USD. The Rules of the game in Forex are different from those in equity and bond markets, but many similarities can be found too.
Trading Tips -Essential information and trading tips regarding the Foreign Exchange Market
The behavior of all Forex pairs is not the same. Some currency pairs are much more volatile, and trend very aggressively, compared to other pairs.
Table: Forex Currency Pairs & Volatility
HIGH VOLATILITY PAIRS
MEDIUM VOLATILITY PAIRS
LOW VOLATILITY PAIRS
EUR/AUD, EUR/CAD, AUD/USD
NZD/USD, USD/JPY, USD/CAD
EUR/JPY, CAD/JPY
EUR/USD, GBP/USD
AUD/JPY, USD/CHF
EUR/GBP, EUR/CHF
Knowing the special features of each currency pair can make the difference. That is why it is better to trade a couple of Forex pairs than 8-10 Forex pairs. Knowledge is power when trading Forex.
Choosing the best time to trade
There are certain hours when the Forex sessions overlap. During those hours, the volume increases by offering greater trading opportunities. In the table below you can see the two Forex Market time zones.
Forex Time Zone
Forex Winter Time Zone (October - April)
Forex Summer Time Zone (April - October)
EST
GMT
EDT
GMT
New York (Open-Close)
8:00 AM
5:00 PM
1:00 PM
10:00 PM
8:00 AM
5:00 PM
12:00 PM
9:00 PM
London (Open-Close)
3:00 AM
12:00 PM
8:00 AM
5:00 PM
3:00 AM
12:00 PM
7:00 AM
4:00 PM
Tokyo (Open-Close)
7:00 PM
4:00 AM
12:00 AM
9:00 AM
8:00 PM
5:00 AM
12:00 AM
9:00 AM
Forex Sessions Overlap
(i) At times when the European and the American markets are both open (between 8 am to 12 am EST) trading GBP/USD, EUR/USD, and USD/CHF can lead to better performance.
Other good times for trading include:
(ii) 1 am to 3 am (EST), when the European sessions are starting and the Asian sessions are closing.
(iii) 7 pm to 10 pm (EST), when the Asian and Australian sessions overlap.
Most Volatile Days of the Week
Some days of the week tend to be more volatile than others. In general, volatility in the Forex majors tends to be larger in the middle of the week and especially as concerns Tuesday and Wednesday. Mondays are static. Fridays are also weak in terms of volatility, as most Forex traders choose to close their positions towards the weekend.
Currency pairs tend to follow seasonal patterns. For example, during April, the British Pound against the US Dollar tends to appreciate more than 80% of all time.
The Forex majors are the most traded and liquid currency pairs in the world. Overall, the Forex majors are involved in more than 85% of the total Forex market volume. The Forex majors offer a tight bid/ask spread which makes them attractive for scalping, intraday, and algorithmic trading.
These are the periodic returns of the 7 Forex majors based on historical data for the period 2000-2018.
EUR/USD is the most popular Forex pair in the world. The base currency is the European Euro (EUR), and the counter currency is the US Dollar (USD). EUR/USD is an extremely liquid financial asset offering the tightest trading spreads in the Foreign Exchange market. EUR/USD narrow spreads attract scalpers and algorithmic traders.
Forex Trading Calendar -When to trade