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The Best Time to Trade Forex in GMT

EUR USD best trading hours
The best trading hours for momentum strategy (and trend strategy) for EURUSD forex pair is period from EUR USD opening hours till GMT noon (London open till noon) and the period when USA stock exchange overlap EUR stock exchange (14.30 GMT – 17.00 GMT)

Below is typical EURUSD daily volatility:

Assia session: This is low volatility period. Good for scalping forex strategy.
EU session open – EUR USD opening hours: EU session starts at 7.00 and 8.00 GMT time (London and Germany stocks exchange starts then). Volatility dramatically increases in that period. One hour after the EUR USD opening hours trend is formed and volatility increased. Till noon volatility and trend should be in the same direction (this is the most common scenario but not the rule).
EU session consolidation: this is the period from noon till the USA market opens in GMT. In this period are the most common breakouts or range periods.
USA markets open – 14.30 GMT USA markets open. In this period trend is formed again and the next several hours continue. This is USD trading time.
USA session consolidation – this is a period which starts from 18.00 and the next several hours’ volatility decrease till the USA market close and Asia session open.

See image below:

One of the main advantages of day trading in foreign exchange (forex) is that the trader can trade all 24 hours in a day. However, a trader is likely to make money only when there are a large number of transactions in the forex pair in which he is trading. Many traders want to find out the best time to trade forex GMT, especially for the popular EUR/USD forex pair. During these hours, the forex pair should be volatile enough, so that the profit generated is more than commission or spread which has to be paid to the broker. Since working long hours can reduce the efficiency, the traders will usually determine the period when the forex pair will fluctuate most and then trade only during these three to four hour periods.

Market timings, EUR/USD price Volatility and EUR USD intraday strategy

During the week, the forex market is open all the 24 hours a day, since time zone differences ensure that a global market is always open. However, traders should be aware that the forex pairs which are traded in each of the forex markets will be different. Hence the peak time for the activity for each forex pair will be different. When the European forex markets are open, forex pairs with the British Pound(GBP) or euro(EUR) are traded extensively. Similar when the United States, Canada forex markets open, forex pairs including the Canadian dollar(CAD) and US dollar(USD) are actively traded. For day traders who are dealing in the EUR/USD pair should know that they will be most active when both the New York and London markets are open. On weekdays, these market timings in Greenwich Mean Time (GMT) are between 0800 and 2200 hours. Tools for showing the timings for forex markets are available.

Acceptable timing for day trading in EUR/USD

There are volatility charts available which show the pip movement for the EUR/USD pair for different hours of the day, in GMT. It is observed that the pip movement will increase significantly starting from 0700 hours daily and continue to remain higher to 20.00 hours. The pip movement for each hour then reduces greatly, so there is less volatility which the traders can profit from. Hence day traders should place their orders between 0700 and 2000 hours GMT. If they trade outside these hours, the pip movement is usually not enough to compensate for the broker commissions. Though the volatility of the forex market varies daily, the timings when the markets are most volatile do not change. In some areas, daylight saving time may affect the trading hours for forex traders.

The ideal time for day trading

Though a forex trader can start trading in the 13 hours starting from 0700 hours GMT, most people have a busy schedule and cannot spend all their time in forex trading. Hence the forex traders would like to find out when the market is most active. Typically the market is most volatile when both the London and New York forex market is open for the three hours between 1300 to 1600 hours GMT according to statistical data available. Since the number of forex trades in both the markets is high, the spreads are the lowest, making it is easier for a forex trader to make a profit since he has to pay lower commissions. Also, the volatility of the forex market is also highest during this period, so it is easier for a day trader to make a profit.

Trend traders need to trade during EU session open and in the period when EU and USA session overlap. Breakouts traders need to wait for important news or period when the trend is consolidating. Scalpers can use Asia session small volatility to make better profits. Of course, all these tips are not rules and different strategies and trading habits can give various outcomes.

What Does Take Profit Mean in Forex?

by Fxigor

Take profit or stop profit order is order information which tells the broker to close your position when the price reaches a specified target price level in profit. So, a take profit order closes your trade once it reaches the price level of profit. When your take profit order is hit on a trade, the trade is closed at the current market value. For example, if your Buy price is $1.1 and your target price is $1.2, then you take profit price when your trade reaches $1.2.

In this image above 1.2 is take profit order.

The foreign exchange (forex) rates are unpredictable, they can increase or decrease any time. Since it is usually difficult for the forex trader to monitor the forex rates continuously, one of the options to automate forex trading is using the Take profit forex strategy. The order to take profit is executed after the trade has reached the specified profit level at the market price. These orders also call limit orders.

Take profit forex strategy

The risk-reward ratio for the trader is defined in terms of the stop loss and take profit levels for the order. Some of the most important factors which determine how successful a forex trader is are the size of the trade and the ratio of the risk to the reward. The take profit order ensures that the exposure of the forex trader is limited, and he exits the market as soon as he gets the price he wants, and not taking the risk of remain invested for a longer period. For short term trading, it is better to use a take profit strategy.

If the short term forex trader does not have a target for taking profit, they may find that the profit they are looking for has disappeared because they did not exist at the right time. Many forex traders are using the average true range or pivot points for defining the right level for taking profit forex-order. For intraday forex trading the target is usually calculated using the true range average and adding the extreme overnight to it. Alternately the weekly or daily pivot points are also used. These levels are usually the extreme levels for the market and the market can retrace its levels.

How to take profit in forex trading
Take profit price can be :
1) Previous low and high prices. For example, yesterday’s high or weekly high or weekly close can be interesting “take profit price level”.
2) Fib level can be an interesting target level.
3) The regression formula prediction price level can be the target level.
4) Pattern recognition and levels based on pattern levels.

Placing a take profit type order

The experience and risk profile of every forex trader varies, so not everyone will find that the take profit option is ideal for forex trading. Many long term traders are interested in taking advantage of the trends in the long term. These traders may feel frustrated when they exited very early despite predicting the trend accurately because of their take profit trading. When the forex rates are fluctuating between specified ranges, take profit is a better strategy. This is because the resistance levels for the forex pair, ensure that the price does not increase beyond the specified level, and support levels, limit the decrease in forex rates. Hence if a forex trader is purchasing forex at the low rates, and waits till the resistance level is reached, a take-profit order is recommended since the rates are again likely to decline to the lower rates in the range-bound market

Indicator for deciding trading strategy

Forex traders can use many indicators like the relative strength index, moving average to determine the trends in the forex market. The average directional index (ADX) is one of the most popular indices among the new forex traders. The value of the ADX varies from 0 to 100 and determines how strong the trends for the forex pair are. If the level is above 30, the pair is trending strongly, and a stop profit is not recommended. If the ADX value is below 30, it indicates that the forex market is ranging. It is better to place an order for taking profit, instead of trying to time the exit correctly.

Systematic Risk in Detail

by Fxigor

What is the systematic risk of investments?

Companies and investors face different kinds of risks that affect their profit or returns on their investment. The systematic risk is the risk caused due to macroeconomic factors affecting the economy that cannot be controlled by either the companies or investors. As a result of this risk, the returns which are earned from investments that are risky will fluctuate. Some factors which affect the profit of a business can be controlled by the business and its management to some extent and are the unsystematic risk of doing business. These factors include labor disputes and mismanagement for a company. The total risk involved for investors can be categorized into unsystematic risk and systematic risk.

Systematic Risk explained

Many unexpected events occur regularly which cannot be controlled by the investors and these are the systematic risk of doing business, investing. This risk can be only avoided by avoiding any investment which is risky. In reality, this is not a viable option for most investors since the only investment options available to them, in this case, would be the CDs and T-bills of government-related organizations. Hence every investor should be prepared to consider these systematic risks while deciding their strategy for investment if they want good returns.

To compensate for the systematic risks while investing, most investors will expect a premium on their risky investments. To explain with an example, if 5% return is offered for a T-bill which is risk-free, the investor will expect 10% returns while investing in shares. The investor hopes that the additional 5% return on shares will compensate for the systematic risk he is taking while investing in shares. Due to macroeconomic factors, the investor can also make a loss on his share investment and this is why he tries to get better returns.

Systematic risk should be considered the opportunity cost of choosing a particular investment when less risky options are available. Investors consider their personal choices and also financial goals while choosing their investment options. For a T-bill with a 3% return, though the returns are low, there is no systematic or other risks for the investor. On the other hand, for a stock offering 15% returns, it is possible that the investor will lose his money, and there is also the opportunity cost which should be considered when he chooses this option compared to the low-risk option of T-bill.

It is usually not possible for investors to avoid all systematic risks if they wish to get good returns. However, they can reduce the systematic risk involved by diversifying the investment. This ensures that even if they make a loss from one investment, the profits from other investments will compensate for the loss. Additionally ensuring that resources are utilized properly and procedures are followed to ensure that only quality investments are chosen, can greatly reduce the risk involved. When a company is being sold, it is important to consider the systematic risk involved since the buyer will be willing to pay a lower amount for the business to compensate for the risk involved in the deal.

Managing Systematic Risk and Unsystematic Risk

Investing money is risky, the investor may lose some of their money. Experts believe that the greatest risk for investors is losing their capital amount permanently. Hence to avoid losing their capital completely, investors have to adopt a strategy for managing the risk for their investment portfolio. For this, they will have to understand how unsystematic and systematic risk will affect their portfolio. They will also have to find out the most effective way of reducing the risks involved in their investment.

Systematic risk is related to a large number of factors affecting the entire investment market, it is not related to a specific risk related to a particular investment. Changes in the bank and other interest rates, inflation, fluctuation in currency exchange rates, wars, recession are some of the macroeconomic factors that affect the systematic risk. These macroeconomic factors affect both the direction in which the market moves and the volatility. The systematic risk cannot be controlled by a single company or individual.

Asset allocation is widely used to reduce the systematic risk involved to some extent. Since the value of asset categories will change in a different manner to changes in macroeconomic data, investors can reduce the volatility in their portfolio by investing in asset classes with a low correlation to each other. When the value of some asset categories like domestic equities, stocks, are increasing, others like bonds, cash will decrease in value and vice versa to reduce volatility. Experts also believe that they should consider the value of the assets while investing. They should invest more in bargains, and avoid investing in assets that are considered overpriced. To reduce systematic risk, they should also invest in cash which is often not appreciated.

Unsystematic Risk

Risk which is specific to a company or industry is considered an unsystematic risk. This risk can be attributed to a specific investment or investment group. It is not linked to the returns from the stock market. It also called the diversifiable, residual or specific risk. These risks can be controlled to some extent by the industry sector or company. These risks are divided into financing, business, credit, product, legal, liquidity, political and other risks. Unsystematic risk can be almost completed eliminated by diversification. The investor with only one stock or bond will suffer great losses if there is a problem with the stock. On the other hand, if the investor has a diversified portfolio of 40 different investments, the losses to problems in a particular stock will affect the portfolio less.

Probability, Expected Portfolio Value

For calculating the expected value of a portfolio, the possible returns and probability of each return will be considered. One way to measure risk is determining the deviation and how the probability of the deviation compares with the expected returns. Diversification reduces the unsystematic risk and portfolio risk is mitigated by allocating assets properly. Mitigating risk ensures that the portfolio manager has more profitable assets with higher risks resulting in portfolio optimization. The portfolio manager can handle a specific amount of risk and if the systematic and unsystematic risk are lowered, he can opt for investments offering higher returns.

Systemic vs. Systematic Risk: What’s the Difference?

In order to understand systemic vs. systematic risk both of these terms a bit more closely. If an event causes a major setback to an economy or a particular industry then it is known as a Systemic Risk but if the market experiences a consistent and everlasting risk for an extended time due to a number of reasons then it is known as Systematic Risk. The information provided in this write-up will help you in understanding the basic differences in these two terms.

Difference between systemic risk and systematic risk

Systemic risk can give a complete shock to the system from outside whereas the shock provided by the systematic risk based on a number of factors can be ongoing and on a day-to-day basis. For instance, the financial crisis of 2008 that has triggered massive implosion in the world market was based on the threat of failure of one of the major banks of the US. It is a good example of systemic risk. The risks based on the changes in interest rates, corporate health, geopolitical issues, etc. are some of the examples of systematic risk.

Moreover, it is hard to predict and scale the systemic risks whereas in some cases it is easier to predict and scale systematic risks

Systemic risk can be defined as the risk related to the complete breakdown of a sector, industry, financial institution, business, financial system or the entire economy. Some of the small but particular problems like leakage of information of website users or flaws in the security of bank accounts etc. can also come in the category of systemic risks. In other words, systemic risk can be defined as a substantial danger occurred in a company that can widely influence the entire financial system.

Systematic Risk, on the other hand, is not easy to define as it is a bit vague. In simple words, it can also be used as the term market risk’ which involves the dangers faced by the entire market and is not easy to resolve even if you spread your holding into several branches. The basis of such widespread risks for the market can be the period of weakness or recession in the economy, decline or rise in interest rates, wars, fluctuations in the prices of the commodities or currencies, etc. However, the systematic risk can be managed but cannot be eliminated by following the strategy of allocating the assets in different ways.

Some examples of systemic vs systematic risks

In 2008, the failure of Lehman Brothers that has affected the entire economy and financial system is one of the most recent examples of systemic risk. This failure has caused a domino effect on the financial system of the entire world because Lehman Brothers was a big company. The government has to intervene to resolve this problem.

One of the latest examples of systematic risk is the economic recession faced by the entire world in the late 2000s. at that time, people who have invested in the market, have seen drastic changes in the value of their investments due to this economic crisis. The assets of different classes were affected differently due to this recession.

Thus, systemic risks are basically different from systematic risks.

What is Forex Trading and How Does it Work?

by Fxigor

Understanding forex – foreign exchange explained simply

Forex trading is business based on speculating on the fluctuating values of currencies between the two countries. The trading goal is to make a profit by converting one country’s currency into the currency of another country. Forex trading includes all aspects of buying, selling and exchanging currencies at current or determined prices.

Understanding forex trading

Each country has its own currency and when the currency of a country is traded or exchanged with the currency of a foreign country, this is called foreign exchange (forex trading). Investors and traders who are interested in Understanding forex should be aware that the currency pairs are decided by the forex brokers. These brokers may not be able to offer a match for the currency pair a trader is interested in. One of the most popular currency pairs is the EUR/USD where EUR or EURO is the European currency, and USD is the united states dollar. The value of the forex pair will increase when the Euro value increases compared to the dollar and vice versa.

If a trader speculates that the USD value will decrease in comparison with the Euro, they will invest in the EUR/USD and wait. This kind of trading is called going long. If the dollar value is likely to increase, the trader will go short on the same pair. All trading is routed through forex brokers, who are intermediaries, executing the trade in the open market. Since there is no centralized market for forex trading, the rates offered by the different forex brokers may be different at any time. The forex brokers place their orders using the networks of the major banks. The orders are executed electronically within a fraction of seconds after they are placed.

For forex trading, each trader need to have a forex account and basic knowledge about technical and fundamental analysis. The basic advantages of foreign exchange are high liquidity, 24 hours market, small transaction costs.Forex is legit business where more than 5 trillion dollars each days fluctuate in forex market.Forex trading is not scam – it is as same as trading stocks or any other asset.

Leverage in forex trading

For most people, the main purpose of trading forex online is making money. Large companies may trade in forex for a purchased planned in the future, or for offsetting a contract which they bagged. Retail traders hope to make money from forex trading due to the changes in the values of the currencies they are dealing with. Forex brokers are usually offering the traders leverage while trading. Leverage allows the trader to trade for amounts that are larger than the balance in his account. The forex broker benefits from leverage since the fees will be directly proportional to the amount being traded. The forex broker collects an amount which is called the spread for each trade.

However, there are some disadvantages of using leverage. Many inexperienced traders, use the maximum leverage available., They often make losses, and use up all the money in their account. Hence it is advisable for new traders, to spend some time, learning forex trading, and using the least amount of leverage while trading initially to reduce their losses.

The most important thing is risk in forex trading. Forex offers high leverage. where traders are able to engage in the conducting of trades in the market by using larger sums of money than what their accounts actually possess.
Risk in forex trading need to be small and managing risk is really one of the most important jobs for each trader.

But the person would yet hold the power to engage in the controlling and trading on the market with a currency in the amount of two thousand dollars. This can be somewhat dangerous due to the fact that new traders may be eager to commence trading with leverage set at 50.1 instantly. But they may not give any preparation concerning the consequences that may ensue.

It sounds like a fun experience to be able to trade with access to leverage. This can increase the chances for one to make good money. However, there is not much talk about the fact that this can also present a higher risk of devastating losses as well.

When someone trades at a rate of 50:1 with the sum of one thousand dollars in their account, this indicates that the person would be conducting trading in the amount of fifty thousand dollars on the market. Each pip is therefore worth about five dollars. When the move for the daily average pertaining to the price of a currency pair is set at 70 to 100 pips, this would mean that the average loss could equate to three hundred and fifty dollars. If one engaged in the conducting of a fairly poor trade, this could result in the loss of a whole account in three days if there are normal conditions in place.

So when we talk about profit, 95% of traders lose their money because of high-risk trading, overtrading, lack of risk management plan.

see Table below:

Many new traders hold a lot of optimism with the belief that they could potentially see the doubling of their account in only a few days. Yet, seeing your account undergo many serious fluctuations can indicate that it will be difficult for your account to double in a short time. Many people commence with the assumption that they are able to endure this scenario. Yet, they are not really often able to handle the scenario, they make grave mistakes in their forex trading efforts and no money remains in their accounts.

Though one may truly not fall prey to the trap of the leverage, the big difficulty is to be able to control one’s emotions. One must be able to be in control of his or her emotions when conducting trades on the forex market due to the fact that this market can be wild as a roller coaster and it takes a strong drive to be able to accept the losses at the proper time and not to make the blunder of grasping onto trades for too long a period of time.

Trading tips

Forex traders will first identify currencies whose value is likely to increase in future. They will then purchase these currencies at the right time and wait till its value increases to make a profit. Though forex trading appears simple, in reality, it is far more difficult to make a profit. Many new forex traders think it is very easy, so they do not do the research required. They then make mistakes and criticize or blame the market for their losses. The reality is that the forex market trading is very similar to the stock market trading, and others, only forex traders are allowed more leverage for their account. Forex trading is like other investment option, it requires some patience and knowledge to make a profit.

What is a Trailing Stop in Forex?

by Fxigor

A trailing stop or trailing stop-loss is a special type of trade order to automatically protect yourself from loss by locking profit. Stop-loss price is not set at a single absolute dollar amount price but instead is set at a certain percentage or a certain dollar amount. For example, if we buy the asset at $100 and set a trailing stop to be $10 from beginning price than when the price goes to $102 my new stop loss will be $102-$10=$92. If the price goes to $150 than my stop loss will move to $150-$10=$140 etc. Instead of a fixed dollar amount, we can use the percentage.

How to use trailing stop in forex?

The reality is that there are several traders who realize that they should accept their losses and let them go as quickly as possible. On the other hand, they also have been told that they should let their profits continue to flow for a long period of time. Yet, if someone is not aware of a tool to aid one to implement this strategy, then it is necessary to understand the details of how to use trailing stop in forex. It is quite similar to the application of the usage of a stop order that is regular, but it can be placed to flow with the market.

Take into consideration, for example, if you desire to ride along with the EUR/USD, then you place an emergency stop that will undergo a phase of triggering if the market happens to not move in your favor. Following the passing of a day or a few more, when the trade is tending toward your favor, you desire to conduct a locking in of some profit in an effort to find out what will occur. It is possible to place a stop in the territory of a positive profit. This could be seen as the placement of a trailing stop. If there is the continuance of the market flowing toward your favor, the profit that you have locked in will continue to increase. This will be an ongoing positive situation until the time that the market slides back in a downward trend and reaches the placement of your stop.

The key role of the trailing stop is to engage in the augmentation of the profit lock while the market is in a moving phase. As such, there is no requirement for you to engage in the conducting of interventions or making adjustments. The functionality of the trailing stop permits you to engage in following trends with a level of safety in your preferred comfort zone so that there is no need for constant monitoring.

In regard to the trailing stop, you can also engage in the placement of the trailing stop for the sake of longer-term trading. You can place your stop far removed from the trend of the market and permit things to undergo development. This works rather successfully for trading systems that are slow, which tend to engage in the locking in of profits for extended months or days. When someone engages in setting up a target that is long term, then it is truly advised to place a trailing stop as well. This will permit the person to engage in the setting up of the entire trade at an early stage while granting it the freedom to take its route.

With the reality that the forex market is running for a time frame of twenty-four hours over a period of six days each week, this results in the need for many hours to undergo monitoring. Instead of enduring a lack of sleep or interrupted sleep, it does make wise sense to apply the usage of the trailing stop to one’s trade in this case. The great result is that the lock of your profit can increase even when you are soundly asleep. The market will continue to go on as it does, while your trade will be able to conduct any needful adjustments or stops.

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