Forex Trading Tips: What currency pairs trade and at what time?
In forex trading, one can trade a list of pairs of almost endless currencies, but there are a number of currencies that have a greater number of participants(liquidity) in the Forex market. There are several currencies that are the most liquid and heavily traded: the dollar (USD), the euro (EUR), the yen (JPY), the pound sterling (GBP), the Swiss franc (CHF), the canadian (CAD), australian (NZD).
However, the most traded pairs, or “the majors” are”
- EUR/USD (euro/dollar) – “euro”
- USD/JPY (U.S. dollar/Japanese yen) – “gopher”
- GBP/USD (British pound/dollar) – “cable”
- USD/CHF (U.S. dollar/Swiss franc) – “swissie”
Of all the major currencies, the USD is by far the Forex star currency, present in more than 80% of transactions.
The other currencies are known as minor currencies and have such a residual volume within the overall Forex market that it is appropriate to focus less of your attention on them, at least in the beginning. Unless, of course, you have special knowledge about one(or more) of them.
The Majors are named precisely because they are the most traded pairs, and it is worth starting to familiarize yourself with Forex trading by closely following the evolution of these currency pairs. In addition, as the currency pairs are more traded, they will be those with greater liquidity and therefore a more adjusted spreads , which interests us in order to minimize the cost of our trades.
At what times do you trade in the Forex market?
Although it is true that Forex is an open market 24 hours a day, it is also true that there are much more auspicious hours to be able to trade it properly. That is, there are times when the Forex market presents greater liquidity and movement, and therefore gives greater opportunities to perform good trades.
There are 3 main sessions in the Forex market:
- The Tokyo Session (or Asian)
- London session (or European)
- United States session (or American)
The session in London is usually the best for presenting/displaying price movements in the currency pairs.
Depending on your GMT time zone, Tokyo opens at 1:00 am and closes at 10:00, London opens at 9:00 am and closes at 18:00 and the United States opens at 14:00 and closes at 23:00.
Naturally then, there are certain hours in which two sessions coincide, and therefore the trading volume in those time slots will be higher. These overlapping time slots are especially active, so they can be a good choice to start trading in Forex.
A final tip is that it’s important to know that there are numerous studies that indicate that the Tuesdays and Wednesdays are the days that the Majors have greater movements in pips. It is also necessary to avoid, as far as possible, trading during news affecting the traded and holiday pairs of the country of origin of the currencies traded. Nor is it a very good idea to trade on Friday and days generally with little movement, such as Sundays. Happy Trading.