As traders, we need to think globally, since the currency markets are international in structure.
We also need to keep in mind that we are individuals inhabiting a single time zone. And though we need to know what’s going on at the global level, if we are trading on the lower timeframes – from scalping up to day trading – we have to juggle both the international currency moves and the local forex market news and announcements.
There is another post on this site – Daily Forex Trading Hours – that covers the difficulties encountered when trading at certain times of day. For example, when the European and Asian sessions open, and the major foreign exchange centres such as Frankfurt and London in Europe, and Sydney, Tokyo and Singapore in Asia, begin trading.
Beyond this, the forex trader needs to be keenly aware of their local market and how it moves during the hours they will be trading it.
Some of the things that you need to know with regards to your local forex times are:
- The sentiment coming from the forex trading session just ended. You need to have a handle on what the major news announcements – scheduled and unscheduled – had on the market sentiment with respect to the currency pairs you will be trading.
- The imminent news for the session you are about to trade. Unless you are actually trading the news announcements themselves, you only need to note the scheduled announcements that may move the market. As time goes by, you may even place less emphasis on news in general except for those obvious majors such as exchange rates, jobs reports etc.
- Local news sources. It’s amazing just how much you can learn from a casual read of one or two of the better newspapers. Sometimes you don’t even have to go down to the financial section, such as when there is a rates announcement coming up that day and the speculation is covered in the lead news articles. Television and website news sources, as well as the usual forex news and calendar resources such as you will find on this site, should help to fill any gaps in your understanding of where the market is currently headed.
- The local forex market character. This can be extremely idiosyncratic, right down to the national and state level. For example, Japanese forex trading may be influenced by current cultural events on the same day that Australian forex trading is subject to the release of GDP figures. And yet both will occur during the same trading session. This can make for interesting, if not exactly tradable volatility in the currency markets.
- Who the local big players are. The major banks, the central banks and the governments. Know what they are up to, what their current outlook and sentiment is, and the likelihood of them making surprise announcements during your trading session.
A major landmark in your personal forex landscape is the broker(s) you deal with. Don’t don’t just open an account and start to trade. Make sure you both know and have written down somewhere that is easily accessible, the following:
- The brokers’ open and close times. When they open for business at the start of the week and when they close at the week’s end. You also need to know what hours they are easily contacted. Good brokers will have some kind of contact facility 24 hours a day for the days they are open for business, but many will be referring you to an overseas service when their local office closes for day. Be aware of how your brokers operate in this respect so that you are able to contact them in emergencies.
- Keep an eye on the spread variability across the forex session you are trading. This will vary across brokers, with some being better to trade at certain times than others.
- Any scheduled down times. Some brokers will take down their servers for maintenance or other reasons at scheduled times each week. Ask your broker what these are, if any.
The last thing you need to be intimately familiar with of course is your workstation and its connections.
Whether this is an older style PC, laptop or even one of the newer options such as mobile or tablet, make sure that both the hardware and software are up to date and running at peak performance.
Especially important is your Internet connection. Make sure you have emergency phone numbers close to hand in case your connection drops out during a trading session.
In my case, I often have a problem with my ISP (Telstra) slowing to a crawl during my evening time, which happens to coincide with the London open. As a contingency, I fire up my laptop which is running on a wireless connection, at that time.
The temptation to think of forex trading as a global pursuit can lead us to just sit and stare at our PC screens, watching charts and waiting for signals. We have to remember that we are very much influenced by our local environment.
When hunting trades we have to be intimately connected to the landscape we are hunting in, otherwise something nasty might leap out of the bushes to show how easy it is to turn from hunter into prey…