Best Time Of The Day To Trade Forex

Did you know that the EUR/USD currency pair is the most traded currency pair in the world? Of the 6 major currency pairs being traded, the EUR/USD accounts for almost 30% of the total volume transacted in the forex market. As a result of its popularity and high liquidity, the EUR/USD pair also has the narrowest spread, about 1.5 - 3 pips depending on your broker. The most active period of trading for the EUR/USD pair is the when Europe’s trading period overlaps with New York’s trading hours. This is from 11:00 am to 3.00pm GMT or UTC.
During this period, any positive US news or sentiment such as an increase in US GDP will cause the US dollar to strengthen against the Euro and vice versa. Typically, the daily trading range for the EUR/USD is around 100 pips.

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Choosing The Right Forex Broker

Nowadays, most FX brokers offer commission free trades. Instead they earn from the currency pair spread when you trade. For example, if the USD/JPY currency pair is quoted by your broker at 121.56/58, the spread is 2 pips, which is the difference between the bid and ask price. This means that if you were to buy JPY at 121.58, you immediately have an unrealized loss of 2 pips. The market has to move in your favor by more than 2 pips before you make a profit. Hence, when selecting an online broker, shortlist the brokers with the narrowest spread.

Then, check the amount of leverage offerred. Most brokers offer between 50:1 to 100:1 leverage. This means that by putting up a margin of US$500 allows you to trade up to US$50,000 worth of currency. High leverage allows you to maximise your profits against your own capital invested. Of course, the opposite is also true, so manage your risk and expectations prudently.

Next, check on the types of accounts available. If you are a newbie, look for a demo or game account when you can learn to trade with virtual money. Then upgrade to a mini account which requires about US$250 - 300 to open. Every broker will have a standard account which need about UD$2000 to open. These usually offer more leverage options and powerful trading and research tools.

Some other factors to consider in choosing an FX broker would be having a stable and reliable trading platform, technical analysis tools, real time charting capability and quality news information.

Some recommended brokers:

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Effects Of Interest Rates On FX Rates

FX rates movement are determined by supply and demand. So, one of the main factors determing rates movement is the currency pair countries’ interest rates. For example, if the US Federal Reserve bank were to lower interest rates, the US dollar will weaken against the other currencies. This is because holders of US dollars will earn less in interest payments due to the lower interest rates. Holders of US dollars will sell their US currencies and put them in other currencies that earn better interest, thereby weakening the US dollar.

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Focus On The Major Currencies

The daily trading volume for all FX currencies is about US$1.7 trillion. That’s more than the NYSE, NASDAQ and London equity markets combined. But unlike stock, six major currency pairs account for about 90% of the daily FX trading volume. You just need to concentrate all your efforts on analyzing these 6 major currency pairs:

Euro Currency / US Dollar - EUR/USD … “Euro”
British Pound / US Dollar - GBP/USD … “Cable”
US Dollar / Swiss Franc - USD/CHF … “Swissy”
US Dollar / Japanese Yen - USD/JPY … “Gopher”
Australia Dollar / US Dollar - AUD/USD … “Aussie”
US Dollar / Canadian Dollar - USD/CAD … “Loonie”

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