Times to watch

In my last post, I covered how the Forex market can be traded round the clock, 24 hours a day. You would have realised that the activities and liquidity of the various currency pairs are not the same throughout the 24 hours. Which are the times that is important? (All times mentioned below are Daylight Saving Time where applicable.)

Well, it all depends on when your normal trading hours are. The hours when you trade is of course the most important to you. There are other times that are important to all traders.

1. Start of a trading day. This will depends on the particular Forex market, if it is the London market it will be 0700 GMT . For purpose of compiling data for daily charts, the start of the day will be 0000 hour GMT (which is 8am MYT, 8pm EST)

2. Start and end of a trading week. Since the Forex market closes on Friday, 4pm EST (that's Friday, 4am MYT, 2100 GMT) and opens again on Sunday 6pm EST (that's Monday 6am MYT, 2300 GMT), there is usually a price gap between the closing price and the opening price. Sometimes this can be more than 100 pips so you may want to close your positions before the market closes for the weekend. These times are based on Interbank FX and other brokers may differ slightly.

3. At release time of scheduled economic reports. You will find that at certain time of the day, the price move rapidly either up or down for no apparent reasons. But if you check with the calendar for the schedule economic reports, you will find that these times of rapid movements are the times when such reports are released.
At such times, it is best not to open any new positions or if you have opened positions, to close them or move you stops to protect your profit since nobody knows for sure which way the market will move once the report is released. Luckily for all of us, most of these economic reports have a fixed date and time for their release and we can prepare in advance before these times come.

The best way to be prepared for this is to have a calendar of forthcoming reports. Most of the Forex websites have a calendar option where the economic reports are listed on a daily, weekly or monthly basis. I print out a weekly list of the reports and highlight those that are of importance that may have a major effect on the price in the market. The website that I use is Forex Factory and here are some details on what I used.

I choose the weekly calendar and there is an option to print out the current view. There is a filter option to select the currencies that you are interested in and also the expected impact of the economic reports. There are 4 categories of impact and I choose just the top two so as not to have too many release times to follow. Finally, I select the time of the report to show the local time so that I do not have to do all the time conversion which can be confusing at times. You can find similar options in other major Forex websites.

Not all the reports have the same effect on the Forex market. One of the most important and one that has the most dramatic effect (on the USD and related currencies) is the NFP or Non-Farm Payroll which is the US unemployment report. This is released monthly at 8.30 am EST on the first Friday of the month and you can witness the effect this coming Friday at 1330 GMT (9.30pm MYT). Lately, the effect of this report is less dramatic mainly because it is more of the same, more unemployment every month so it is nothing new and nothing unexpected. Just watch the EURUSD this Friday to see what the effect will be this time around. Will there be fireworks or just a whimper? Nobody can be sure so don't bet on it.

Ronald Kwok
http://cbpirate.com/s/cbp/ronaldkwok