While being a forex trader can be a rewarding exercise, it is also fraught with risk, danger and uncertainty. After all, although it is the most liquid and potentially lucrative trading vehicle available, it is also subject to significant volatility and the type of sudden price shifts that can catch even experienced investors unaware.
Fortunately, contemporary traders are able to negate many of these issues through the advent of technology, which enables investors to access to a wealth of historical and real-time data and comprehensive analytical tools. This allows them to make the most of their trading capital at any given time, while it has also eradicated many of the barriers to entry that were typically associated with the forex market.
Leveraging this Data and Economic Events to Optimise Traders
But what exactly is the core purpose of these tools and data-sets? Essentially they are designed to inform traders, both in terms of the precise orders that they execute and their timing. The latter point is particularly important, especially given the volatility of the foreign exchange and its propensity for sudden, seismic price shifts.
In this respect, perhaps the most influential tool is the forex trading calendar, which is available through most online platforms and includes all of the important data releases during the calendar year. This helps you to identify the key, trend-defining events in the marketplace, which in turn helps to inform individual trades and highlight the best possible time go short, long or invest in a specific currency pair. The key, of course, is to determine which data sets are the most important, taking into consideration your philosophy, trading strategy and existing portfolio.
One of the most important dates, for example, is the Jackson Hole Economic Policy Symposium. This annual event took place on 25 th August this year, and it has been a date in the calendar since it was first introduced by the Federal Reserve Bank of Kansas City in 1978. It is essentially a meeting of great economic minds, as central bankers and policy experts unite to explore emerging issues and financial trends. The findings are often extremely insightful, and provide unique data that can be leveraged for optimal trading results.
When is the Best Time to Trade?
While individuality is everything in the forex market, there remain universally good and bad times to trade forex (both in terms of seasons and daily cycles). In terms of the former, for example, autumn is usually a time of high trading volumes and multiple data releases, as Europe, Germany and UK all release key price index information. This creates a volatile market with high liquidity, making it ideal for those with a greater appetite for risk depending on their chosen currency pairs.
It is the concept of daily trading cycles that is most important for traders, however, as the market remains accessible or 24 hours each day and host three, global trading sessions during this time. Now while some will argue that the Asia-Pacific time slot is the best time to execute orders major currency pairs, it is universally accepted that the overlapping periods which connect separate trading sessions offer higher levels of liquidity. This is particularly true for major currency pairs, and this type of attention to detail can significantly increase your returns.
The Last Word
There’s no doubt about it; technology as played a pivotal role in empowering forex traders and affording them access to the real-time market. From the emergence of online brokerage platforms like City Index to the demo accounts that help traders to hone their trade in am simulated market environment, it has never been easier for investors to operate in a volatile space.
Above all else; however, having the ability to monitor key economic events and analyse their impact on the market allow traders to refine their strategies and time their individual orders to perfection.