Timing is everything in currency trading. Because the foreign exchange market operates 24 hours a day, it’s impossible for a trader to track every market move and make an immediate response at all times. To devise an effective investment strategy, it’s important to note the amount of market activity during different trading periods in order to maximize the number of trading opportunities during the hours in which you operate.
In addition to liquidity, a currency pair’s trading range is heavily dependent on geographical location and macroeconomic factors. Knowing what time of day a currency pair has the widest or narrowest trading range will help traders improve their capital allocation.
The following analysis outlines the typical trading activity of major currency pairs in different time zones to see when different pairs are the most volatile. It tabulates the average pip range for the different currency pairs during various time periods between 2002 and 2004. All sessions are described in terms of U.S. Eastern Standard Time (ET).
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