The Forex markets go through many swings and changes from day to day. You don’t have to execute a lot of trades before you start to see a definite, regular fluctuation in the overall volume of activity at certain times of day.
Congratulations, you’ve just discovered overlap times! Here’s a little information to help you understand what they are and why you should take advantage of them.
Overlap times are those points when the Forex markets swell because traders in multiple major trading centers are all at work. There are three big ones to look out for: Europe / North America, Australia / Asia, and Asia / Europe. To explain how they work, simply consider the timing of the Europe / North America hours.
During the last few hours of business in Frankfurt and London, the major trading centers on the East Coast of the US are opening up. This means traders on two continents are active at the same time. For reference, the E/NA overlap falls in the early morning EST, the A/A overlap is in the evening, and the A/E overlap occurs late at night.
Why are overlap times so great? It’s because the markets move faster and further due to the increased activity. More traders means more trades being executed, and the overall volume of trade on the Forex markets will swell dramatically. The total population online will always peak during overlap hours, and these times also usually see the day’s highest volume of trades.
Speed and volume are not things you should be afraid of in the Forex markets. The fast pace of trading during the overlap times are especially well-suited to short-term, low-margin strategies.
If you’re in Forex to scalp small profits on scores of fast trades, the overlap times are your golden hours. Even if you prefer a more relaxed trading style, it’s important to pay a little extra attention during the overlap hours.
Because things move so quickly, trends evolve during overlap times much more rapidly than they otherwise do. This makes it easier for you to get a feel for them.
It’s a great idea to track trends during the overlap times early on in your Forex career, when you’re still getting a feel for the markets. Once you understand how trends work in the overlap hours, you’ll be able to recognize them as the occur more slowly and subtly during off-peak times. This will allow you to place smart trades throughout the day.
Their fast pace also makes overlap times the perfect testing ground for new trading strategies. If you’re experimenting with a different trading style, give it a try during the next overlap time.
Because of the way the market evolves rapidly in the overlap hours, you can quickly build up an extensive track record with your new strategy. This gives you plenty of data you can use to evaluate its effectiveness and decide whether or not to adopt it in the long term.
No matter where you live, you’ll find it rewarding to get on the Forex markets during the overlap hours.
It may put a strain on your schedule, but you’ll gain a much deeper understanding of the markets if you make a habit of watching them during these critical times. Take a look at the next overlap session and see what real Forex trading looks like at top speed!