Forex is one of the most traded markets in the world, with more than $5 trillion worth of currency shifted on a daily basis. As such, there are numerous considerations to take into account when trading forex, such as currency history, ongoing political disturbance, and economic performance.
One of the most important however, is time, which has major influence over the forex market for a number of reasons. Here are some of them.
First and foremost, the amount of time the forex market is open is significant in influencing trader’s decisions, given that it is a 24/5 market which allows overnight trading. This means that, unlike with other markets, those trading forex can take advantage of the most lucrative opportunities as and when they present themselves, without having to worry about the market shutting (except at weekends).
It also means forex is a nonstop market which has a reputation as being one of the most fast paced and volatile in the world.
There are a variety of different currency pairings in the forex market, divided into the categories of major, minor and exotic. Every pairing exhibits different behaviour and is influenced by different global economies. It makes sense, then, that the investment opportunities for each pairing arise at different times, and as such every trader needs to look out for and study these.
In the case of USD/GBP, for instance, the extensive time gap of 5 hours means that economic updates and political events which may influence the value of the pairing occur in a narrow time period in which traders must make their investments.
As a result of time gaps and differing trading schedules, there are peak times in which to trade (which differ between pairings). Those trading forex must keep an eye on these in order to maximise their chances of making a profit and being able to effectively react to the swift and constant changes in market behaviour.
Every trader needs to find the peak times which will be the best for them to trade in and make the most of them. This also means avoiding the times which are not so good to trade in, as more often than not it would be more economical and effective trading a different pairing/market rather than trading a pairing with no market activity.
Profiting in the Long Term
The final reason time is important is that patience is required to actually start making a profit from forex. Given that it is so volatile and often unpredictable, it takes a great deal of of time to start making a profit.
Every forex trader needs to have patience and the will to wait for the right opportunities to invest, and it is essential that they have the right mindset to succeed in the long run.
The word ‘time’ is clearly significant in a number of different ways when applied to the forex market, but each is incredibly important and must be carefully considered in order to maximise trading efficiency and ensure that every opportunity is effectively exploited.