This article is one of a series which looks at the advantages and weaknesses of trading using the hedged, grid trading system to trade volatile markets. The hedged grid trading system uses the principle that one should be able to cash in at a gain no matter which way the market moves. No stops are therefore required at all.
The only way this is logically possible is that one would have a buy and sell active at the same time. Most traders will say that that is trading suicide but let's take some to look at this more closely. Let's say that a trader enters the market with a buy and sell active when a currency is at a level of say The price then moves to The buy will then be positive by and the sell will be negative by At this point we start breaking trading rules.
We cash in our positive buy and the gain of goes to our account. The sell is now carrying a loss of The grid system requires one to make sure that cash in on any movement in the market. To do this one would again enter into a buy and a sell transaction.
Now, for convenience, let's assume that the price moves back to level The second sell has now gone positive by and the second buy is carrying a loss of According to the rules one would cash the sell in and another will be added to your account.
That brings the total cashed in at this point to Now the first sell that remained active has moved from level where it was to level where it is now breaking even. This gives an overall a gain of in total. We can liquidate all the transactions and have some champagne. The city also has a big impact on currency fluctuations because Britain's central bank, the Bank of England, which sets interest rates and controls the monetary policy of the GBP, has its headquarters in London.
Forex trends often originate in London as well, which is a great thing for technical traders to keep in mind. Technical trading involves analysis to identify opportunities using statistical trends, momentum, and price movement. Currency trading is unique because of its hours of operation. The week begins at 5 p. EST on Sunday and runs until 5 p. Not all hours of the day are equally good for trading. The best time to trade is when the market is most active.
When more than one of the four markets are open simultaneously, there will be a heightened trading atmosphere, which means there will be more significant fluctuation in currency pairs. When only one market is open, currency pairs tend to get locked in a tight pip spread of roughly 30 pips of movement. Two markets opening at once can easily see movement north of 70 pips, particularly when big news is released. The best time to trade is during overlaps in trading times between open markets.
Overlaps equal higher price ranges, resulting in greater opportunities. Here is a closer look at the three overlaps that happen each day:. While understanding the markets and their overlaps can aid a trader in arranging his or her trading schedule, there is one influence that should not be forgotten: the release of the news. A big news release has the power to enhance a normally slow trading period. When a major announcement is made regarding economic data —especially when it goes against the predicted forecast—currency can lose or gain value within a matter of seconds.
Even though dozens of economic releases happen each weekday in all time zones and affect all currencies, a trader does not need to be aware of all of them. It is important to prioritize news releases between those that need to be watched versus those that should be monitored. In general, the more economic growth a country produces, the more positive the economy is seen by international investors.
Investment capital tends to flow to the countries that are believed to have good growth prospects and subsequently, good investment opportunities, which leads the country's exchange strengthening. Also, a country that has higher interest rates through their government bonds tend to attract investment capital as foreign investors chase high yield opportunities.
However, stable economic growth and attractive yields or interest rates are inexorably intertwined. Examples of significant news events include:. A stock exchange generally lists and trades in shares of a given country, so even when other stock markets are open internationally, they are largely trading in local securities and not the same exact stocks. While there are foreign stocks listen in the U. Liquidity refers to how easy it is to quickly buy or sell securities for a fair price.
On the other hand, in an illiquid market the spread between the bid and ask may be very wide and not very deep. I general, liquid currency pairs are those that are active and have high trading volume. The most traded currencies in the world include the U. It is important to take advantage of market overlaps and keep a close eye on news releases when setting up a trading schedule. Traders looking to enhance profits should aim to trade during more volatile periods while monitoring the release of new economic data.
This balance allows part-time and full-time traders to set a schedule that gives them peace of mind, knowing that opportunities are not slipping away when they take their eyes off the markets or need to get a few hours of sleep.
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The Best Hours for Forex Trading Currency trading is unique because of its hours of operation. The week begins at 5 p.m. EST on Sunday and runs until 5 p.m. The forex market is open 24 hours a day in different parts of the world, from 5 p.m. EST on Sunday until 4 p.m. EST on Friday. · The ability of the forex to. Yes, you can trade both at the same time, but nearly all of the time you will need two different brokers for these as Stock trading is very different from.