Page 20 - Ultimate Guide to Currency Trading

is trading FX in the market. While it is true that the thinnest trading is in the late afternoon New York
time (due to the not yet fully opened Asian markets), the FX market is deepest and in fullest swing
during the time of the twenty-four-hour day that major money centers are open and overlapping. For
example, you as a currency trader will find it easier to find setups and exit out of profitable trades in
the times when the Asian markets are in their late-in-the-day hours and the European markets are just
starting to open up (rather than in the late afternoon). This period of heightened market activity is
around midnight to 2:00 A.M. New York time. Many U.S. based traders find that it fits in their overall
trading program to trade into the wee hours of the morning, move in and out of the AUD, EUR, JPY,
etc., and close up shop by 3:00 A.M. to 4:00 A.M., with the next day's sunlight hours spent living life
outside of the currency-trading world. Another time of trading-center overlap is in the 4:00 A.M. to
9:00 A.M. New York—time period. It is during this time that the brokerage houses, banks, hedge funds,
and individuals are working in Zurich, Paris, London, and New York, trading away to make their
fortunes. These early morning trading hours can be the heaviest trading hours of the day. This is
because the news that happened overnight in the Asian markets is met with the developments of the
European markets, and then digested by the then-awakening New York markets.

It is also true that on big news days,' or days that central bank announcements, interest rate
changes, inflation numbers, etc., come out in Europe, there is a good chance that similar news will be
reported in the morning hours of the North American countries. The effect can heavily weigh on the
direction of currency pairs, especially the majors and the euro proxies.

The currency trader's work day can be quite different: reading news, looking for setups,
all while the sun is down and the moon is out. On the other hand, life can be quite
exciting when you make a day's salary in the FX market, all before the kids get up to get

Essential ready for school, or while the late-late movie plays in the background.

For example, the inflation numbers for Sweden might come out, along with rumors about the
state of the European Union and its debt, only to be followed by a drastically down U.S. S&P 500
futures report—all before the sun even comes up in New York, Chicago, or San Francisco.

This is an example of a heavy news day, and you could find it to be a day full of opportunities
to make profits in your trading account. Sudden movements of 1 percent to 1.75 percent are not
unheard of on these days. While that might seem manageable or even small, you must calculate into
that equation that it is possible to trade FX at a 20:1 or even 50:1 margin ratio. With this said, such a
dramatic news day could result in a movement of 87.5 percent in either direction for a FX pair that
moves 1.75 percent at a 50:1 mar-gin. Quite a lot to be sure, and if you played carefully, you could
generate a profit by risking a small percentage of your overall FX portfolio, and yet yield a week's
worth of gain for your account. If this happened, you would then have the option to take minimal risks
for the rest of the week, keeping your trading account intact and safe, all while knowing that your
profit goals and requirements for the week have been met. Early morning hours and late nights are