Is there an ideal time to trade during the day?

Online trading platforms have opened up a range of profitable opportunities for people who aren’t professional traders and who, most likely, have another full-time job. An amateur trader can’t be expected to closely monitor the market and be readily available to respond all the time. So, it’s important to understand that there are some patterns in trading times and, if you know when the markets are busier, you may want to concentrate your efforts on these.

How does volume and figure releases affect your trading?

First of all, you are more likely to successfully conclude your trades, i.e. buy and sell, when there are other traders around looking for deals. In other words, when the volume of traders is high, market liquidity is also high. This tends to happen at the start, mid-point and end of session. Volume is also affected by seasonality, e.g. during the summer months and in the run-up to Christmas, European markets tend to be quieter.

Markets also tend to be busy around the release date of official reports. Central banks and other government agencies share figures which indicate the direction of a country’s economy, a commodity’s demand and supply etc. If the released data is what the market expected, then you shouldn’t notice much volatily because prices will have already adapted to the anticipated change. If, however, figures are significantly above or below the traders’ expectations, then you will see both increased trading activity and substantial price volatility.

Obviously the above is easier said and done. We can advise you to focus on the start, mid-point and end of a trading session but trading sessions happen at different times of the day around the world. E.g. if you trade forex and you’re based in Europe, sessions begin in Asia on Sunday night and end in the US on Friday night with almost 24-hour activity in between. The currencies you trade though will probably determine whether some markets are more worth following than others.

Regarding figure releases, again these happen all the time around the world. Some central bank announcements have a bigger impact on the world economy, e.g. U.S., U.K., Eurozone, and some figures are more important than others, e.g. GDP, Consumer Price Index etc. Then again, a lot depends on which instruments you trade and which countries are more important for your individual portfolio. Remember that, in many cases, markets move based on sentiment around where a price should be rather than objective data, so rather than trying to be everywhere all the time, focus on the things that matter for your assets.

We’ll finish this lesson with a question that only you can answer: how much time can you realistically set aside for trading? Short-term trading, where you enter and exit within a few hours, is lucrative but if you can’t monitor rapid market moves you may be increasing your risk unnecessarily. In that case, medium and long-term trading may be a better option for you even if it means missing out on the adrenaline rush.

Bitesize basics
  • When the volume of traders is high, market liquidity increases and trading is easier.
  • The beginning, mid-point and end of a trading session are the busiest times of day.
  • Activity also increases when official institutions release reports around the state of the economy. Prices adapt to what the markets expect these reports to say but unexpected figures increase volatility.
  • Prices are often based on sentiment so if you can’t monitor the markets closely, especially during busy times, it may be worth focusing on mid to long-term trading.

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