Optimising the time of day you trade, and what days of the week can give you an extra edge for maximum profits. These are important to remember, timing is everything.
The best time to trade is during non volatile trading hours, essentially 2 pm to 6 am Eastern Time (New York), which is 7 pm to 11 am UK time. This period will have less price movement and will give you a better opportunity to get your trade up and running with out suffering losses. To get more specific I have personally found that 7am – 11am UK is good, the market really start to wake up around 9-11am UK time (and then again at 9-11 NY time) so if your in your trade before hand you will have likely got a better buy in price, you can then sit back and see if your trade prediction was correct.
If you miss these time frames, what can happen is your trade can go against you pretty quickly during the initial phase of the trade. This is just due to the natural ebb and flow and doesn’t mean your set up was wrong or wont work, it just means your buy in price maybe higher, and you will stay in the death zone for longer.
The death zone is the period of time when you first enter the trade in a volatile market, it goes up then back down a lot, taking you from profit to loss frequently. This can play havoc or a new traders nerves and can result in traders breaking their own rules, moving stop losses, getting out of otherwise perfectly good trades to early etc etc.
You can drill this down even further and look at the best time for specific currency pairs, European pairs have highest volatility during European market hours, Asian pairs during Asia hours. Pretty obvious, but knowledge is power.
Days of the week
The day of the week can have a large effect on what the market will do as well. Fridays are generally more unpredictable as many short term (1 hour – 2 day) day traders will be taking profits on a Friday. This can cause the prices to go down some, but won’t have an effect on medium / long term day traders (1 – 6+ weeks). If your planning to get in a long term trade on a Friday and it’s a really good set up, I would say it’s ok if you can except the extra risk. Just set your stop loss wider. Ensure it really is a good set up, don’t take a silly gamble for something that’s not 100% perfect.
Monday can also be troublesome for the same opposite reason as above, a lot of traders are getting back into the market for the week ahead. So if your looking for only the absolute highest probability trading (which you should be), mid week (Tuesday – Thursday) will give your best entry days. Once the trade is active you can leave it running until a sell signal is present or your profit or stop levels are hit. You don’t need to exit the market on a Friday and re-enter on a Monday for the same stock unless you have good reason. A good reason will be anticipation of a big economic news event being announced. If a war is started over the weekend you could end up +/- 1000’s of points. It’s unlikely, but you won’t be able to get out the trade if it does happen so bear that in mind and make sure you have funds to cover.
You should expect lower trading activity during:
- Public holidays
- Bank holidays
- Sundays (No trading)
- During major news events – News can make the markets turn nasty and unpredictable. Make sure your up to date with all major news here.
- During major events like super bowl, xfactor final (seriously)