When is the Best Time of Day to Trade Forex?

[tar]

Was wondering about this myself . Here is a study made by FXCM ...

http://www.dailyfx.com/forex/techni...n_is_the_Best_Time_of_Day_to_Trade_Forex.html

 

[counter_violent]

Go on i'll state the bleedin obvious then. Most retail traders will have their preferred pairs that they trade but what they don't take into acct is that they may well be trading the wrong pairs in the wrong sessions. No use trying to trade EU in asia session etc etc .

 

[tar]

Infact the Euro is the worst major pair during the "most active hours" ...

 

[counter_violent]

Infact the Euro is the worst major pair during the "most active hours" ...

That is a reflection on the trader who clearly doesn't take into acct the increase in volatility from Asian to Euro sessions...not to mention that half of them will be on the wrong side of the directional move if it comes.

 

[tar]

The Euro has tighter spreads and less volatility in general and still performed the worst during peak hours ( EU/US overlap ) , its clear volume is also effecting profitability , more efficiency i would say , all traders/algos/banks competing against each other at the same time , different trading time = different market characteristics .

Backtest from the article ( RSI range trading ) :

 

[Liquid validity]

TBH I would take that chart in your 1st post with a pinch of salt.
What it is actually showing is the profitability of FXCM clients.

USD and Euro most trades currencies.
FXCM clients mostly American.
So the profitability stats are quite likely skewed by that.

Although the plot does suggest 9-10 EDT is not a great time for EURUSD, and I would agree,
that chart also seems to suggest the late asian session is the best time, which is odd to say the least.

I think what is happening here is FXCM cannon fodder volume dries up outside of
paek hours, leaving only those with a profitable swing trade method to fuel the stats.

In short, what its really showing are the times when FXCM clients are least profitable.
That is skewed whn most are present and by pair popularity.
Its not a study of volatility or range by time bracket.
Its something I've looked at myself:
http://www.trade2win.com/boards/forex/178822-eurusd-session-activity.html
Although that thread barely scratches the surface.

 

[tar]

TBH I would take that chart in your 1st post with a pinch of salt.
What it is actually showing is the profitability of FXCM clients.

USD and Euro most trades currencies.
FXCM clients mostly American.
So the profitability stats are quite likely skewed by that.

Although the plot does suggest 9-10 EDT is not a great time for EURUSD, and I would agree,
that chart also seems to suggest the late asian session is the best time, which is odd to say the least.

I think what is happening here is FXCM cannon fodder volume dries up outside of
paek hours, leaving only those with a profitable swing trade method to fuel the stats.

In short, what its really showing are the times when FXCM clients are least profitable.
That is skewed whn most are present and by pair popularity.
Its not a study of volatility or range by time bracket.
Its something I've looked at myself:
http://www.trade2win.com/boards/forex/178822-eurusd-session-activity.html
Although that thread barely scratches the surface.

The study is taken from 12 million live trades data , most FXCM clients are not American , but its fair to say that most retail traders are range traders , so no surprise there when there is more volume more volatility and more action traders caught off guard .

Here's the full study , check part 2 :

http://docs.fxcorporate.com/fxcm-traits-of-successful-traders-guide.pdf

 

[tar]

Euro is somewhat less volatile :

http://fxtrade.oanda.com/analysis/currency-volatility

 

[Liquid validity]

The study is taken from 12 million live trades data , most FXCM clients are not American , but its fair to say that most retail traders are range traders , so no surprise there when there is more volume more volatility and more action traders caught off guard .

Here's the full study , check part 2 :

http://docs.fxcorporate.com/fxcm-traits-of-successful-traders-guide.pdf

Where is the data that breaks down clients by region?
I might be missing it but I can't see it, not that I'm right either, just a guess.

Also, that guide, unbelievably says that the Asian session is best for EURUSD...
http://docs.fxcorporate.com/fxcm-traits-of-successful-traders-guide.pdf
Page 15 summary.

I think the whole point of this is its not a study of volatility, or hourly range etc.
Its purely a study of FXCM client profitability.
There is no correlation from where I'm standing.
Without a detailed breakdown of FXCM peak volume by time and pair its meaningless.

If the Asian is best for EU, then its either mostly U.S. clients trading after work,
or more likely, profitability jumps as there are actually fewer clients trading then,
so swing traders that are profitable are skewing the result.

Either way, there is no way I would trade EU during the Asian...

 

[tar]

Where is the data that breaks down clients by region?
I might be missing it but I can't see it, not that I'm right either, just a guess.

Also, that guide, unbelievably says that the Asian session is best for EURUSD...
http://docs.fxcorporate.com/fxcm-traits-of-successful-traders-guide.pdf
Page 15 summary.

I think the whole point of this is its not a study of volatility, or hourly range etc.
Its purely a study of FXCM client profitability.
There is no correlation from where I'm standing.
Without a detailed breakdown of FXCM peak volume by time and pair its meaningless.

If the Asian is best for EU, then its either mostly U.S. clients trading after work,
or more likely, profitability jumps as there are actually fewer clients trading then,
so swing traders that are profitable are skewing the result.

Either way, there is no way I would trade EU during the Asian...

They did aswell include some backtested strategies with time-filter , you can check chart : 2.1 2.3 2.4 2.5 2.6 , so its not just about FXCM clients .

I'm not surprised more efficiency is expected during peak hours thats the whole idea of the market , when everyone is trading trading should become harder , look at the ES for example many dreamers thinking to bank a 2 point/day target to make a living , another point here is at the Asian session the range is tighter , no big news , no big action , slow , which means no irrational behavior by the retail trader , emotions after all is a big part of the game for retail traders , unlike the EU/US overlap session which is the worst , so i'm not surprised from the data i was always wondering but didnt find a study to rely on , at the end it depends on your trading style and what you are trading i guess .

 

[tar]

188K tradeable accounts , 22K with FXCM US :

http://forexmagnates.com/fxcm-sees-red-in-q3-2013-results-but-october-volumes-strong/

http://forexmagnates.com/exclusive-q3-2013-us-retail-forex-broker-profitability-report-ib-1/

 

[Liquid validity]

188K tradeable accounts , 22K with FXCM US :

http://forexmagnates.com/fxcm-sees-red-in-q3-2013-results-but-october-volumes-strong/

http://forexmagnates.com/exclusive-q3-2013-us-retail-forex-broker-profitability-report-ib-1/

OK fair enough, most FXCM accts aren't U.S.
Surprised TBH though given the restrictions on U.S. citizens opening
non U.S. accts and the increased hassle for non U.S. residents (wire only transfer etc.)

 

[Liquid validity]

They did aswell include some backtested strategies with time-filter , you can check chart : 2.1 2.3 2.4 2.5 2.6 , so its not just about FXCM clients .

I'm not surprised more efficiency is expected during peak hours thats the whole idea of the market , when everyone is trading trading should become harder , look at the ES for example many dreamers thinking to bank a 2 point/day target to make a living , another point here is at the Asian session the range is tighter , no big news , no big action , slow , which means no irrational behavior by the retail trader , emotions after all is a big part of the game for retail traders , unlike the EU/US overlap session which is the worst , so i'm not surprised from the data i was always wondering but didnt find a study to rely on , at the end it depends on your trading style and what you are trading i guess .

Yeah fair points, I still think its skewed in some way though.
For me the European session is best for EURUSD.
Thats when its most active.

There has to be an explanation, I'd guess its the spiky EU behaviour catching people out.
Waiting for confirmation & tight stops = stopped on spiky reversal.
I still think EOD swing accts are skewing the stats as well, something like that at least.
I can't believe its scalpers in the Asian, not with FXCM spreads...

As for the backtests, I wouldn't trust anything touted by any broker
who took the other side of the trade, or at least has engaged in slippage skimming.
That comment isn't aimed at any one particular broker, just for the record.

 

[tar]

OK fair enough, most FXCM accts aren't U.S.
Surprised TBH though given the restrictions on U.S. citizens opening
non U.S. accts and the increased hassle for non U.S. residents (wire only transfer etc.)

As a non-us resident you can deposit by CC as well , FXCM has many branches all over the world ...

 

[Liquid validity]

As a non-us resident you can deposit by CC as well , FXCM has many branches all over the world ...

Fair enough, never really looked at them anyway, so didn't know (clearly ).
It is usually the case with U.S. brokers without overseas offices.
Happened to me when MBT UK closed.

Anyway, apart from going off on tangets,
I still think that FXCM saying the Asian is best for EURUSD is
completely wrong.
I tested mine in the Asian, didn't work.
European was best with U.S. session tending to only
generate 25% of EU session return.
Asian was a loss.
That isn't applicable to all cases obviously.

 

[Shakone]

It's difficult to make any convincing conclusions from the stats in the first post. It could just be that there is a common bias to hold winning positions overnight rather than losing positions, and therefore you get better profitability stats overnight, or it could be related to the market and that there is a common bias to trade ranges.

It's an interesting argument about the market being more efficient during some hours though.

 

[tar]

Fair enough, never really looked at them anyway, so didn't know (clearly ).
It is usually the case with U.S. brokers without overseas offices.
Happened to me when MBT UK closed.

Anyway, apart from going off on tangets,
I still think that FXCM saying the Asian is best for EURUSD is
completely wrong.
I tested mine in the Asian, didn't work.
European was best with U.S. session tending to only
generate 25% of EU session return.
Asian was a loss.
That isn't applicable to all cases obviously.

Who said its better for everyone ? The study shows its a bit better for retail traders as a group , so its not right nor wrong its a stats regarding their clients , most of them use leverage and buy low and sell high , so it depends on how you trade and your trading style ...

 

[counter_violent]

It's difficult to make any convincing conclusions from the stats in the first post. It could just be that there is a common bias to hold winning positions overnight rather than losing positions, and therefore you get better profitability stats overnight, or it could be related to the market and that there is a common bias to trade ranges.

It's an interesting argument about the market being more efficient during some hours though.

The markets are always efficient...not sure what you mean, can you expand?

 

[Shakone]

The markets are always efficient...not sure what you mean, can you expand?

I was referring to tar's post #10.

I don't really know whether the markets are always efficient. I suppose it depends on what you mean by efficient. To me an efficient market means that there simply isn't opportunity to speculate profitably, regardless of strategy. So in that sense, I would argue the markets are not always efficient.

 

[counter_violent]

I was referring to tar's post #10.

I don't really know whether the markets are always efficient. I suppose it depends on what you mean by efficient. To me an efficient market means that there simply isn't opportunity to speculate profitably, regardless of strategy. So in that sense, I would argue the markets are not always efficient.

So would you agree with FXCM's assertion that trading EUR USD in Asia is a better idea than trading it in any rightful session?

If we put currencies in session then Asia would throw up JPY, AUD, NZD with the proviso that USD is always going to be in the mix, given it's worldly status, but down the list.

Personally, I think it's total nonsense for FXCM to suggest trading EUR in Asia session, unless it was crossed with one, some, or all, of the Asia session currencies, with EUR USD coming way down the list in that scenario.