When to buy and sell a currency pair(trade forex)?
After understanding some elements to consider for a good pair to trade forex, it is now the time for you to determine when to buy and sell currency pairs .
Knowing when to buy or sell (trade) helps you to come up with a strategy that you would use every time you trade. You only buy or sell when that exact set up shows up on the market chart.
When trading foreign currencies, you buy when the market is moving up and sell when it is moving down. You should first choose the currencies you want to trade, study them and analyze their trend movements, volume, liquidity and their volatility.
After gauging their strength, you can choose to trade forex depending on which currency is gaining or loosing its value. If for example you choose to trade AUD/CAD, and you realise that the Australian economy is becoming stronger that means its currecy AUD will appreciate in value which makes it stronger than the Canadian dollar.
Here the market is moving upwards in favor of the AUD, so it will be a good time for you to buy AUD while selling the CAD. If the CAD is stronger than AUD, then the opposite is true. Sell AUD while buying the CAD. We buy at a low price expecting price to rise and sell at a high price expecting price to fall to earn a profit.
So when you buy and price falls below your entry market price, it’s a loss. The same way, when price rises above your entry market price after a sell, it’s a loss to.
This is further illustrated in the figure below.
Currently,we at least have a big picture of when to trade forex pairs. We buy when the market price trend is moving upwards and sell when the market price is falling.
However on reversal of price below the entry level for a buy, it is a loss. Again when the market changes direction going above our sell market price it becomes a loss.
As we cover our next sessions we shall teach you on how you can avoid making big losses and determine take profit level. Don’t go off there is more to learn
When can you really trade forex?
Unlike other markets, forex market is open for trading 24 hours a day, five and one-half days per week. It’s very convenient compared to other markets since it’s always open day and night and you can trade forex anywhere at your place of convenience.
However just because you can trade the markets any time of the day and night does not mean that you should because this may not be good for your health.
Over trading can lead to fatigue and exhaustion of your body and at the same time exposes your account to too much risk.
It’s of great importance to know the most active trading periods, the busiest time when markets have highest market volumes of trades. This is during the market overlap sessions.
Carefully study the market aspects of forex i.e. Active trading hours and trading session, know which time will be most volatile, liquid and decide on which time suits your trading strategy.
The most active sessions in the forex market are; the London session, Tokyo, New York and Sydney. The best trading hours are times when volume and volatility levels are at highest peak. This means more of a particular currency pair is being bought and sold and currency pair is moving fast and trending quickly.
The large volume and strong volatility cause large pip movements during the best trading hours and the spreads become narrower hence lower transaction costs. So this enables you to catch a good trading opportunity and make profits.
The markets open on Monday 7:00 Sydney time( 10:00 PM GMT) and closes on Friday 17:00 New York time (10:00 PM GMT).
Forex market is most active in sessions of overlap such as the US/Europe overlap between 8AM-12PM (new York time), Europe/ Asia; 3am-4am and Tokyo/Sydney; 7:00pm-2am.
Tokyo is the first session to open and traders use its trade momentum to develop their strategies to speculate the future market changes.
How long you should hold an open position, is a personal thing for all traders. The decision is all yours. You know what your goals are as a trader, the kind of strategy you use to trade. All this starts from what you are? and What you want? If I am to answer, this...