Price and Time in Forex Trading

Daniel L
Category:  Trading Articles
Timing is everything. Like in life, in Forex trading sometimes is more important when the market will move than where it goes.
Speculators come to the Forex market with the explicit intention of making money. They buy and sell currencies hoping to land on the right side of the market.
If the market does move in the intended direction, they make a profit. If not, they mark a loss.
Every trader in the world focuses on price. Where will it go?
After all, everyone must answer a straightforward question: up or down?
But how about when? When will the market move come, if any?

Time in Forex Trading

Despite the conventional wisdom calling for the price as being more important, it isn’t. Time matters most.

Negative Swaps

Traders use various timeframes to chart a market. Depending on the trading style, their decision to buy or sell a currency pair bears a cost. A big one.
Unless you are a scalper, keeping positions open overnight comes at a cost. And, due to negative interest rates, that is an elevated one.
Every currency pair comes with a swap. In principle, it represents the difference between the interest rates of the two currencies that make the pair. However, it considers some more.
They differ from broker to broker too. For example, the primary 2017 trend trade was on the EURUSD pair. From 1.05 to 1.20, the EURUSD made a monster move.
But, being long on the EURUSD pair is costly. You must pay negative swap every day on most brokers.


Timing the move is everything. If you went long on the pair in April 2017, you don’t have to worry about negative swaps. But if you timed the entry poorly, that’s a cost to consider.

Economic News

Economic news plays a vital role in timing an entry. The currency market spends most of the time in ranges.
In fact, almost seventy percent of the time is spent like this. The market needs a reason to move. And, that reason comes mostly from economic news.
News impacts the market. However, building the right expectations help. Take the NFP (Non-Farm Payrolls) for example.
This is one of the most important economic data. Because the Fed considers the jobs data before moving on rates, traders scrutinize the release.
It comes out every first Friday of the month. Typically, nothing moves on the Forex dashboard that week. Until NFP comes out on Friday, ranges dominate.
In other words, if you plan buying or selling a currency pair that has the U.S. Dollar in its componence, think twice if the NFP week is next.

Conclusion

Knowing when to enter a trade makes a hell of a difference in your trading results. Some traders open positions just for the fact that the market is open. That’s not a sound strategy.
Timing a move spears the trading account from unnecessary costs. When all those costs add up at the end of the trading year, you’ll realize timing is everything. Even for the Forex trader.
 
 
 
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