February 11, 2014
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Avoid The Foreign Exchange Market Off Hours

foreign exchange market

One of the best advantages of the foreign exchange market is that it is open round the clock for five and a half days a week. In other words, the market is accessible 24 hours a day to traders. This means that the market affords a lot of flexibility and freedom to traders who work on tight schedules.

However, this also introduces a level of ambiguity to the forex market which affects new forex traders the most. The ambiguity revolves around the right time to trade in the forex market i.e. whether a trader can profit equally by trading during off hours as he does by trading during peak hours.

What Is The Right Time To Trade?

After spending a little bit of time trying to trade during various periods in the day, most new traders realise that trading performance can vary on the basis of which time they are trading at. Resultantly, they start wondering if there is a right time to trade in the foreign exchange market.

If you are wondering the same thing then you are on the right track in learning about the market because trading during off hours is not recommended. Most expert traders make it a point to calculate the right time to trade in the forex which plays a role in why they profit so consistently.

What Is Considered Off Hours?

Off hours are those periods in which the majority of forex traders are not active on the market. Off hours vary from currency pair to currency pair i.e. each currency pair has its own period of off hours and peak hours.

Basically, these are periods in which a large chunk of the market i.e. bank traders, institutional traders, and high worth individuals are not active in the market. As these entities provide the largest percentage of the money in the market, their absence becomes notable. Here is what their absence does to the foreign exchange market.

Low Liquidity

As mentioned, off hours in the forex market are denoted by high worth entities not being present in the foreign exchange market. With so much money not being present in the market, the liquidity levels of the market take a hit. This lack of liquidity means that opportunities to profit are few and far between while risks are more abundant for small time traders.

High Volatility

Low liquidity in the market has a direct impact on the volatility in the market. As there is not enough money in the foreign exchange market during off hours trends are not stable and forex rates fluctuate a lot. In this volatility, it can be very difficult for a trader to make any substantial profits.

Uncertain Signals

Low liquidity and high volatility combine to make even the most astute strategies into money traps. The reason for this is that it can be difficult to find any certain forex signals if the rates in the foreign exchange market are as unpredictable as they are during off hours.

 

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