How Examining Higher Time Compressions can Benefit Your Trading and The Post-Labor Day Outlook of

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Broker!
    Perfect for beginners!
    Free Demo Account! Free Trading Education!

  • Binomo
    Binomo

    Only for experienced traders!

How Examining Higher Time Compressions can Benefit Your Trading and The Post-Labor Day Outlook of the EUR/USD

September 1, 2020

As binary traders, especially for those of us who trade very short-term – e.g., 60-second options, 5-15 minute expiries – we often don’t really think about the broader scope of the market. When I do a trade analysis post, I’m almost always just providing my five-minute charts and a really up-close view of the market. It makes sense as, after all, when trading these short-term expiries you necessarily need to look at smaller time compressions for optimal results. Occasionally, I’ll throw in a daily chart when discussing recent multi-day, multi-week, and/or multi-month performance of the asset, but it’s really not a huge focal point.

But every now and then, it’s nice to take a look at the broad scope of the market and understand how things are going in terms of its broader view. Is it consolidating? Is it trending? Where might it go next and how might that influence what you do in your smaller-scale trades? I do swing trade forex, albeit in a limited fashion at the moment, as I have limited time, but it helps me stay abreast of the larger trends in play in the market. How are world economic factors contributing to what’s occurring on a day-to-day basis? Should you have a tendency to trade in one direction or the other based on this information?

Every day before I begin I always spend a decent 15-30 minutes to look at the higher time compressions, starting with the daily, and see what price levels could come into play and where might the market potentially go. Then I move down to the four-hour, then the one-hour, 30-minute, and 15-minute, until I’m at the 5-minute chart and more or less ready to focus on trading that time compression, looking for predicting which side of the fence price might be on after a 5-15 minute trade (i.e., the basic idea behind small timeframe binary options). It’s always a good ritual to get into and has helped me in my own trading.

In terms of overall outlook, the Euro has definitely been in a bit of a downfall this summer against other major currencies. The financial situation in Russia has been declining. U.S. data has been mostly positive which has led to the decline in this pair. Moreover, the European Central Bank is also considering additional monetary stimulus to fight against the economic stagnation in the Eurozone. Quantitative easing efforts are intrinsically depreciatory toward a currency, as more of it is pumped into the economy based on the simple decision-making of the central bank governing its dispersal. If data concerning the U.S. labor markets produces favorable results (in terms of beating expectations or roughly matching optimistic forecasts), this pair could continue to decline. Next week will be telling in its direction going forward. Non-farm payroll data comes out this Friday, September 5th.

The 1.3000 level is obviously a level to be monitored closely. If the U.S. labor situation looks sharp, it could target 1.3000 or even dip into the 1.2000’s, which hasn’t been seen in over a year. If the jobless claims and non-farm payroll data in the U.S. yield positive results, the Federal Reserve, head of U.S. monetary policy, could look to increase interest rates.

Interest rates are always a big factor when it comes to currency valuation. A higher interest rate increases demand for that currency from investors (because it leads to a higher return) and results in an appreciation of said currency. If that’s the case, you could look toward the idea of the USD making even more gains against the Euro.

Needless to say, a lot is still in the air. A bottom could come soon, but it really depends on continuous evaluation of macroeconomic variables respective to each of the world’s two biggest economies. As a trader, all of this is more relevant the higher the timeframe you use to base your trading off of. Although, of course, as a short-term binary trader, experiencing daily downtrends, which have been common recently, can certainly influence a predilection for put options. So even on the smallest of timescales, you may find – should find – that you’re statistically more likely to choose the direction of the overall prevailing trend that governs the more macroscopic time scales, like the four-hour compression and above.

Mifune

In Regards to Taking Time Off when Stressed

December 27, 2020 Hello! I have been absent from my blog for quite some time due to my school-related obligations. Thank you to everyone who sent me PM’s on the site, asking questions and commenting and whatnot. I do apologize that occasionally I do delay my replies. But I have a few weeks off in […]

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Broker!
    Perfect for beginners!
    Free Demo Account! Free Trading Education!

  • Binomo
    Binomo

    Only for experienced traders!

The Traits of a Quality Broker

November 8, 2020 What broker do you use and what should I look for in one? I am currently using Boss Capital (see Boss Capital Review). I’ll start by saying that no broker is perfect. Some provide fast withdrawals yet have trading platform issues, such as a distinct lag that often doesn’t get you into […]

A Discussion Regarding Deposits, Withdrawals, and How to Keep Yourself Safe

November 7, 2020 Q: How often do you recommend withdrawing money from brokers? I prefer to do so once a week when I’m actively trading. I don’t leave anything in a broker’s account during a period when I’m rarely trading (like now). Even if you don’t earn any profit that particular week, I do feel […]

Trading Psychology: “I can’t pull the trigger”

October 4, 2020 Q: I know that overtrading is talked about a lot, but I have the issue of “undertrading,” or having the fear of actually getting into a trade. How do I overcome this? A: Not being able to pull the trigger is on the opposite side of the spectrum of the overtrading phenomenon. […]

Binary Options Trading for September 11, 2020 (1/2 ITM)

I went with the EUR/USD here, trading from 2AM-8AM EST. It’s a bit longer than I can probably handle at this point, now that far more of my time is occupied as opposed to the summer months. But almost all charting software platforms these days have alerts that one can set when price comes to […]

Binary Options Trading for September 10, 2020 (2/3 ITM)

One thing that I learned early on in trading is to be wary of support and resistance levels that are established during “down hours.” That is, times during the day when the market simply isn’t very active because the three main market sessions (i.e., Asian, European, and North American) aren’t open (8PM-11PM GMT), or during […]

Trading Under Limited Time Conditions (3/3 ITM)

September 8, 2020 Just as the post-(U.S.) Labor Day volume begets more movement in the market, it typically entails that I moderate the amount of time that I dedicate to trading, given I’m a still a university student and as anyone who has been through schooling knows, it can take up a lot of time. […]

Labor Day EUR/USD Trading (4/5 ITM)

September 1, 2020 Unfortunately, I’m doing this write-up a week later than I wanted to. But school often consumes a lot of my time, so naturally if I do any trading my write-ups will often be delayed until I find a spare 1-2 hours to go back and analyze the charts, take screenshots, and construct […]

How Examining Higher Time Compressions can Benefit Your Trading and The Post-Labor Day Outlook of the EUR/USD

September 1, 2020 As binary traders, especially for those of us who trade very short-term – e.g., 60-second options, 5-15 minute expiries – we often don’t really think about the broader scope of the market. When I do a trade analysis post, I’m almost always just providing my five-minute charts and a really up-close view […]

Two Examples of Extremely Solid Set-ups (and a third that was pretty good as well)

August 28, 2020 I’ve been going with the GBP/JPY the past couple days given it simply seems a bit more amenable to trades than the EUR/USD based on first glance alone. The pound-yen has provided some nice up-and-down movement whereas the euro-dollar has mainly been trending and/or just not providing very many good set-ups as […]

The Best Forex Trading Hours

The optimal time to trade the forex (foreign exchange) market is when it’s at its most active levels—that’s when trading spreads (the differences between bid prices and the ask prices) tend to narrow. In these situations, less money goes to the market makers facilitating currency trades, leaving more money for the traders to pocket personally.   

The 4 Major Forex Exchanges

The four major forex exchanges are located in London, New York, Sydney, and Tokyo.   Forex traders need to commit their hours to memory, with particular attention paid to the hours when two exchanges overlap. When more than one exchange is simultaneously open, this not only increases trading volume, it also adds volatility (the extent and rate at which equity or currency prices change). Both of these factors can benefit forex traders. 

This may seem paradoxical. After all, investors generally fear market volatility. In the forex game, however, greater volatility translates to greater payoff opportunities. 

Worldwide Forex Markets Hours

The forex has 15 independent worldwide exchanges, open weekly from Monday through Friday. Each exchange has unique trading hours, but from the average trader’s perspective, the four most important time windows are as follows (all times are shown in Eastern Standard Time):

  • London: 3 a.m. to 12 p.m. (noon)
  • New York: 8 a.m. to 5 p.m.
  • Sydney: 5 p.m. to 2 a.m. (midnight)
  • Tokyo: 7 p.m. to 4 a.m.

While each exchange functions independently, they all trade the same currencies.   Consequently, when two exchanges are open, the number of traders actively buying and selling a given currency dramatically increases.   The bids and asks in one forex market exchange immediately impact bids and asks on all other open exchanges, reducing market spreads and increasing volatility. This is certainly the case in the following windows:

  • 8 a.m. to noon, with both New York and London exchanges open
  • 7 p.m. to 2 a.m., with both Tokyo and Sydney exchanges open
  • 3 a.m. to 4 a.m., with both Tokyo and London exchanges open

The most favorable trading time is the 8 a.m. to noon overlap of New York and London exchanges. These two trading centers account for more than 50% of all forex trades. On the flipside, from 5 p.m. to 6 p.m., trading mostly happens in the Singapore and Sydney exchanges, where there is far less volume than during the London/New York window.

There can be exceptions, and the expected trading volume is based on the assumption that no major news developments come to light. Political or military crises that develop during otherwise slow trading hours could potentially spike volatility and trading volume, making it a favorable time to trade.

High-Volume Forex Trading Hours Don’t Always Translate to Profits

Forex traders should proceed with caution because currency trades often involve high leverage rates of 1000 to 1. While this ratio offers tantalizing profit opportunities, it comes with an investor’s risk of losing an entire investment in a single trade. A 2020 Citibank study found that just 30% of retail forex traders break even or better. Tellingly, 84% of those polled believe they can make money in the forex market.   The chief takeaway is that new forex investors should open accounts with firms that offer demo platforms, which let them make mock forex trades and tally imaginary gains and losses. Once investors learn the ropes and become seasoned enough, then they can confidently begin making real trades.

The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Broker!
    Perfect for beginners!
    Free Demo Account! Free Trading Education!

  • Binomo
    Binomo

    Only for experienced traders!

Like this post? Please share to your friends:
How To Choose Binary Options Broker
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: