EURUSD Trading in “Off” Hours

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Best Time to Day Trade the EUR/USD Forex Pair

Best hours of the day to day trade the EUR/USD

Image by © The Balance 2020

The allure of forex day trading is that you can trade 24-hours a day. Unfortunately, that doesn’t mean you should. Day traders should only trade a forex pair when it’s active and there’s lots of volume and transactions occurring. The EUR/USD has certain hours which are acceptable for day trading because there is enough volatility to generate profits, which are likely higher than the cost of the spread or commission. To be efficient and capture the largest moves of the day, day traders hone in even further, often day trading only during a specific 3–4-hour window.​

The Impact on EUR/USD Volatility

The forex market operates 24-hours a day during the week because there’s always a global market open somewhere due to time zone differences. However, not every global market actively trades every currency, so different forex pairs are actively traded at different times of the day.

When Europe is open for business, pairs that involve the euro (EUR) or British pound (GBP) are more actively traded. When the U.S. and Canada are open for business, pairs that involve the U.S. dollar (USD) and Canadian dollar (CAD) are more active.

If day trading the EUR/USD, the times that are likely to be most active for the pair, on average, will be when London and New York are open. Those markets are open between 0800 and 2200 Greenwich Mean Time (GMT). To see major market hours in your own timezone, or your broker’s (charts) time zone, use the forex market hours tools.

Acceptable Times to Day Trade EUR/USD

The hourly volatility chart shows how many pips the EUR/USD moves each hour of the day (times are in GMT). There is a significant increase in the amount of movement starting at 0700, which continues through to 2000. After this, movement each hour begins to taper off, so there are likely to be fewer big price moves day traders can participate in.

Day traders should ideally trade between 0700 and 2000 GMT. Trading outside of these hours, the pip movement may not be large enough to compensate for the spread or commissions.

Volatility changes over time, but the most volatile hours generally do not change too much. 0700 to 2000 GMT will continue to be the most acceptable time to day trade, regardless of whether daily volatility increases or decreases. Note that daylight savings time may affect trading hours in your area.

EURUSD Trading in “Off” Hours

While there is much less volatility in the EURUSD when London or New York aren’t open, there is still potential. Not typically a time I trade, I couldn’t help but notice how the EURUSD respects the Envelopes originally discussed in the EURUSD Day Trading-Oct 7 (and subsequent posts) during the quieter time of day, after New York closes and Europe hasn’t reopened yet.

Figure 1 shows a 5 minute chart for the several hours following the US session (in blue). Once the downtrend began it respected the upper band, which is where the sell orders are placed during a downtrend (at the lower band during an uptrend). This is a trend following strategy, therefore trades signals are only taken when there is a strong trend in place (see: When a Trend is Trustworthy and When It Isn’t).

Figure 1. EURUSD 5 – Minute Chart (January 23/24, After U.S. Close)

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Four potential short/put trades are marked. The first trade is questionable, since the downtrend was not in full effect yet, yet the slightly lower low just prior to taking the position indicated the price was losing some steam to the upside.

All of these trades would have worked out. Usually this strategy entails a 3.5 pip stop with a 6 pip target; the target can be extended if conditions warrant and the stop can be reduced (only reduced, never expanded) once the price is moving in our direction.

Given reduced volatility, even making 6 pips can be difficult without waiting a couple hours (not my style). Therefore, for those trading traditional markets the stop can reduced to about 2 to 2.5 pips and the target reduced to 6.

For those trading binary options, choosing an expiry of about 25 to 30 minutes would have produced 4 winners out of 4 trades.

Of course anytime the market trends nicely trading is “easier.”

The day before was trickier, as there was not much in the way of a trend. Using price analysis to help filter signals, there were 3 trades as shown in Figure 2. Two would have been profitable using the stop and target method. Trading binary options, an expiry of 25 to 30 minutes would have also resulted in 2 wins and 1 loss.

Figure 2. EURUSD 5-Minute Chart (January 22/23)

Why certain trades are avoided have been covered extensively in my trend and price analysis articles. Briefly though, as the US session ends the first few gyrations are avoided because the market is not trending. The lower low sets up the first trade since there is a potential for a trend down. The market moves aggressively lower setting up the second short trade. It keeps rallying and this would have been the loser. There is a potentially long trade right after this (near 04:10 on the chart) but since the market hasn’t shown a higher high the trend could still be down.

The price does rally aggressively, but doesn’t pull back to the lower band, therefore there are no entry signals. When it finally does pullback, it is only after creating a “double top”–in other words, the price couldn’t make a higher-high and therefore the trend was in jeopardy, which is why a long trade isn’t taken.

Finally we have our last trade, which we take because the price couldn’t move higher (see above) and then created a lower-low than the prior swing low.

Being able to read price action with this strategy is key. While it can be frustrating at first, learning how to read price action is the ultimate trading skill next to mastering your own psychology. Some traders may prefer trading in the “off” hours, since moves are slower because of less volume and less traders involved in the moves. That doesn’t mean it is easy though. Temper expectations based on the decreased volatility and volume. If trading standard markets, stops and targets should be reduced, reflective of current conditions. You’ll also likely need to trade with an ECN forex account (basically zero spread, but you pay a commission) to make trading these 4 to 6 pips moves worthwhile. If trading binary options, you make the same regardless of how much the market moves, but be sure to do some research and get a sense of how long you want to be holding the option.

Trading the Euro – EURUSD

When FX Traders first come to trading platforms, their interest is almost universally drawn to the same vehicle.

This vehicle is typically highlighted, stands out, and is noted as the EURUSD.

The reasons for this popularity make sense. Europe and The United States represent the two largest economies in the world. While the US Dollar remains the world’s most popular reserve currency, the fast rise of the Euro to international prominence brought it to the world’s second most common reserve currency; and this was in an extremely short amount of time.

How Have Traders Fared in EURUSD?

Unfortunately, this rampant popularity in the currency pair hasn’t equated to profits for traders speculating in the currency pair. In the Traits of Successful Traders series, David Rodriguez looked at exactly this question while examining over 12 million live trades, placed by real retail.

The graph below will show the five of the most popular currency pairs, plotting the profitability of traders (running up/down on the left side of the graph) at various times throughout the day (plotted horizontally along the bottom of the graph). EURUSD is represented by the blue line.

Prepared by David Rodriguez for the Traits of Successful Traders series

As you can see, EURUSD is actually the least profitable pair at many times throughout the day, despite its raving popularity.

Notice that profitability seemed to be far lower on EURUSD during the very active market hours (from 4AM EST to 2PM EST). This is an important point, as this is shortly after London, the largest FX market center in the world, opens for the day and brings a massive amount of volume into the market.

When the US opens for business at 8 EST, more volume is introduced as The United States is the second largest FX market center. Notice that profitability for traders in EURUSD seems to bottom shortly after the US Open (8-11 AM EST).

From the research, it appears as though as volume and market activity increase – trader profitability in EURUSD decreases, and decreases more-so than what was seen in the other most commonly traded currency pairs.

Given the information we have on how traders have fared in the past, we can build an approach based on what has or has not worked for other traders in the past.

The first point of emphasis is that while traders may have been worse-off trading EURUSD during the very active times of the day (The London and US sessions); profitability on EURUSD is actually above or near 50% for much of the Asian Trading Session.

As a matter of fact, after The United States closes for the day at 5:00 EST (shown as 17:00 on the graphic), trader profitability stays above 45% until London opens the next morning.

For traders wanting to speculate on EURUSD, the Asian trading session may be more accommodating than the ‘active’ hours of the day.

One of the primary reasons for this may be in the fact that the Asian session typically sees smaller price movements than what may happen during the very active times of the day. Support and Resistance, generally speaking, will see much more respect during the slower Asian trading session.

In ‘When is the Best Time of the Day to Trade Forex’ David Rodriguez looks at exactly that, and finds that the average movement of the EURUSD currency pair is far smaller than during the Asian trading session than during the active hours of the day.

Prepared by David Rodriguez for the Traits of Succe ssful Traders S eries

Because of these slower price movements and the fact that support and resistance will have a greater tendency to be respected, traders may find range trading approaches on the Euro-Dollar to be most accommodating during the Asian Trading Session.

Once a trader knows they want to take a range-based approach on the pair, filling in the strategy can be simple. There are numerous materials available from DailyFX to assist traders with their range-trading approaches.

In How to Analyze and Trade Ranges with Price Action , we looked at a mannerism of trading ranges using only price inflections and swings, no indicators necessary. By taking an approach such as this, you can locate the support or resistance in the market as the Asian session opens, and look to buy when price is at or near support; and look to sell when price is at or near resistance:

Created by James Stanley

In the JW Ranger S trategy , Jeremy Wagner brings price action together with the Commodity Channel Index, or CCI, to decide when exactly he might want to trigger into a position.

What if I Can’t Trade the Asian Session?

Given the 24-hour nature of the FX market, and considering that to many FX traders from Europe and the United States, the Asian session is still considered ‘off-hours,’ this was a common reason why traders didn’t look to trade when the market may be more accommodating to their goals.

In ‘ How to Trade Forex Majors like the Euro During Active Hours ,’ this question is addressed directly by David Rodriguez in the third installment of The Traits of Successful Traders series .

David suggests that, since markets generally exhibit more volatility during the active hours, and this is when traders have been the most prone to The Number One Mistake that Forex Traders M ake ; traders could use this volatility to their advantage by using aggressive risk-reward ratios with breakout strategies. From the research:

“Breakout Trading Strategies tend to do relatively well in volatile environments, so if you plan to trade during these times, look to trade breakouts.”

With breakout strategies, traders are monitoring support and/or resistance; waiting for a break of the price level with the expectation that once the break is made – price will continue running in that direction, allowing for the maximization of profits in instances when the trader is correct.

In the article ‘Price Action Breakouts,’ we looked at a mannerism for trading price-breaks without the necessity of any indicators at all, using price alone to denote support and resistance levels.

In the article, ‘Breakouts: How to Stay Away from Some Losing Trades,’ Jeremy Wagner introduces another indicator, price channels aka Donchian Channels, to help monitor price levels that may warrant future breakout opportunities.

— Written by James B. Stanley

You can follow James on Twitter @JStanleyFX.

To join James Stanley’s distribution list, please click here .

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