Point Checklist : What are the best forex market hours and Key Benefits ?

Forex markets are known for their endless reservoir of profits and this is mainly because of the extremely flexible business hours. You can capitalize on the best bullish or bearish phase, given that you are in the right place at the right time. You, as a trader, can open positions anytime you want but there are certain time slots that are much more preferable than others. Before we get into a detailed discussion on the best hours to make profits, it will be better if you were aware of the following basics regarding Forex markets and their functionalities.

There are three main trading sessions which constitute actual Forex market trading hours:

• ➤US Session, which begins at 0800 hrs and ends at 1700 hrs (EST);
• ➤London Session, which begins at 0300 hrs and ends at 1200 hrs (EST); and
• ➤Tokyo Session, which begins at 1900 hrs and ends at 0400 hrs (EST), on the next day.

The weekend always starts a bit early and only half the Friday is active while the other half is more or less inactive.
The Forex market hours calm down by 1200 hrs and the market closes by 1700 hrs.

The best time to trade, as proven by many analysts, is the middle of the week.

Now that you are familiar with the basics, you must be wondering what the phrase ‘best time’ actually means. The main characteristic of the Forex market is its volatility or its ability to swing to extremes in a given period of time. 

Sometimes the shifts are so drastic than a moment’s profit can turn into loss the next moment. This volatility ensures that the possibility of making profits stays but you must understand that when the market is stagnant, so is the possibility of making any profit.

In order to make maximum profit, you should trade when multiple sessions overlap.

London and US, between 0800 hrs to 1200 hrs (EST);
London and Tokyo, between 0300 hrs to 0400 hrs (EST).
This does not mean that you cannot function beyond the time slots mentioned; it simply means that these would be the preferred slots to trade.

If you don’t want your trade period to extend beyond the day, you should open your position at the volatile hours and because of the fluctuations, you will be able to close it before the day ends. Although, it is true that higher risk entails a higher reward, it can sometimes work the opposite way too.  If Forex market opens an opportunity to make endless profits, it can also cause endless losses. You must always be careful and cautious.

TRADING YOUR WAY THROUGH SMALL PROFITS IN THE FOREX MARKET

Forex market is where people earn a lot more than any other market and hence, lose much more than any other market as well. You must remember that one person’s profit is another person’s loss. As much as you try to not be the loss making person, everyone makes losses once in a while. The trick is to exploit this amazing profit reservoir called Forex market with the best risk-return ratio.

To be successful in making enough profits and mitigating your losses, you must take care of the following points...

Risk Measurement 

It is right when people say that ‘Higher the risk, higher the rewards’ but there is a limit to the amount of risks you can take. Assume that you get to know about some information which makes you believe that today is a very good day for the market; you expect the market to show a drastic reaction to the news. So, what do you do? If you are one of those who put their entire money in the market, banking on their hunch, then you will not be successful for too long. The key to being successful in Forex trading is to balance your risk and employ good management of your funds. Your portfolio must be diverse to prevent instant wipe outs and ensure a steady income. It is proven that, in the long run, it is not a risk taking attitude that succeeds but a balanced one.

Leverage 

Again, this is something which brokers conveniently omit in telling their traders. An increase in leverage increases your profits but it also increases your risk. Approximately 2% of your entire account is considered to be an acceptable level of risk because it ensures that you have something left, even if your gamble doesn’t pay off. Leverage can be a two way sword, it may benefit you and it may end up killing your position.

Thanks to brokers and their sandcastles of promises, people have grown used to fake stories of infinite profits. It is your duty, as a trader, to investigate everything your broker tells you and not believe in promises blindly. There are many sources from which you can find out about Forex trading like newspapers, internet, online finance journals, finance magazines etc. Your aim must be to avoid losses at any cost; this is not a pessimistic eye to look at Forex but a realistic one.

HOW TO UNDERSTAND ECONOMIC INDICATORS ?

The Gross National Product (GNP)

The Gross National Product measures the economic performance of the whole economy. This indicator consists, at macro scale, of the sum of consumption spending, investment spending, government spending, and net trade. The gross national product refers to the sum of all goods and services produced by United States residents, either in the United States or abroad.

The Gross Domestic Product (GDP)

The Gross Domestic Product (GDP) refers to the sum of all goods and services produced in the United States, either by domestic or foreign companies. The differences between the two are nominal in the case of the economy of the United States. GDP figures are more popular outside the United States. In order to make it easier to compare the performances of different economies, the United States also releases GDP figures.

Consumption Spending

Consumption is made possible by personal income and discretionary income. The decision by consumers to spend or to save is psychological in nature. Consumer confidence is also measured as an important indicator of the propensity of consumers who have discretionary income to switch from saving to buying.

Investment Spending

Investment—or gross private domestic spending - consists of fixed investment and inventories

Government Spending

Government spending is very influential in terms of both sheer size and its impact on other economic indicators, due to special expenditures. For instance, United States military expenditures had a significant role in total U.S. employment until 1990. The defense cuts that occurred at the time increased unemployment figures in the short run.

Net Trade

Net trade is another major component of the GNP. Worldwide internationalization and the economic and political developments since 1980 have had a sharp impact on the United States' ability to compete overseas. The U.S. trade deficit of the past decades has slowed down the overall GNP. GNP can be approached in two ways: flow of product and flow of cost.

Industrial Production

Industrial production consists of the total output of a nation's plants, utilities, and mines. From a fundamental point of view, it is an important economic indicator that reflects the strength of the economy, and by extrapolation, the strength of a specific currency. Therefore, foreign exchange traders use this economic indicator as a potential trading signal.

Capacity Utilization

Capacity utilization consists of total industrial output divided by total production capability. The term refers to the maximum level of output a plant can generate under normal business conditions. In general, capacity utilization is not a major economic indicator for the foreign exchange market. However, there are instances when its economic implications are useful for fundamental analysis. A "normal" figure for a steady economy is 81.5 percent. If the figure reads 85 percent or more, the data suggests that the industrial production is overheating, that the economy is close to full capacity. High capacity utilization rates precede inflation, and expectation in the foreign exchange market is that the central bank will raise interest rates in order to avoid or fight inflation.

Factory Orders

Factory orders refer to the total of durable and nondurable goods orders. Nondurable goods consist of food, clothing, light industrial products, and products designed for the maintenance of durable goods. Durable goods orders are discussed separately. The factory orders indicator has limited significance for foreign exchange traders.

Durable Goods Orders

Durable goods orders consist of products with a life span of more than three years. Examples of durable goods are autos, appliances, furniture, jewelry, and toys. They are divided into four major categories primary metals, machinery, electrical machinery, and transportation. In order to eliminate the volatility pertinent to large military orders, the indicator includes a breakdown of the orders between defense and nondefense. This data is fairly important to foreign exchange markets because it gives a good indication of consumer confidence. Because durable goods cost more than nondurables, a high number in this indicator shows consumers' propensity to spend. Therefore, a good figure is generally bullish for the domestic currency.

Business Inventories

Business inventories consist of items produced and held for future sale. The compilation of this information is facile and holds little surprise for the market. Moreover, financial management and computerization help control business inventories in unprecedented ways. Therefore, the importance of this indicator for foreign exchange traders is limited.

Construction Indicators

Construction indicators constitute significant economic indicators that are included in the calculation of the GDP of the United States. Moreover, housing has traditionally been the engine that pulled the U.S. economy out of recessions after World War II. These indicators are classified into three major categories:

• 1. housing starts and permits;
• 2. new and existing one-family home sales and
• 3. construction spending.

Construction indicators are cyclical and very sensitive to the level of interest rates (and consequently mortgage rates) and the level of disposable income. Low interest rates alone may not be able to generate a high demand for housing, though. As the situation in the early 1990s demonstrated, despite historically low mortgage rates in the United States, housing increased only marginally, as a result of the lack of job security in a weak economy. Housing starts between one and a half and two million units reflect a strong economy, whereas a figure of approximately one million units suggests that the economy is in recession.