Rhythm of 24
Updated: Sep 25, 2018
In numerology the number 24 is a number of family, harmony, idealism and companionship. There's a desire for long-term security. It is also a great diplomat tending to use sensitive cajoling to mitigate differences and restore and keep peace in the home. And at the end of the day (!) 24 hours is what we've just had with 24 more on the way and as traders of the currency markets it is for us to do with them as best we can. To wit: It is often said (keep salt handy at all times please) that the FX market is a "24 hour x 5 days a week market". Of course it is. This is not untrue. You can trade through the morning, noon, afternoon, evening, night and back to the morning if you are so inclined - but to the retail trader this is not as useful as one might sometimes be lead to believe. I have been fortunate enough to watch the rhythm of the FX markets from a UK perspective and it has become clear to me that there are definite hot-spots, warm spots, and cold spots during a normal day (and also during the week) which helps to focus our attention and indeed how seriously we take potential trading opportunities that we might be perceiving.
The diagram above represents my experience of how volatility (velocity and width in movement of prices) changes during a typical 24 hour trading day. The colour coding of light blue, through orange, through red and all shades in between, is intended as an intuitive indicator on how the FX markets "heat up and cool down" throughout the day. Read in conjunction with the annotations and with some knowledge of opening and closing times as shown the table below, my intention here is to offer a guiding framework as to when the market is most "true" i.e "motoring with intent" (towards red) and where it is "dithering"- i.e, not sure where it's going (towards light blue). Essentially, you do not want to get involved in a dithering market, i.e. the light blue areas, whereas the optimum times are where we are shifting towards the red parts of the spectrum.
It is also worth mentioning my experience that directions set up during the morning session before the US becomes significant can be completely reversed on occasion, depending on how the US stock markets (namely the S&P and the Dow) open. And all this of course is predicated on any big economic announcements - so lots to look out for and beware of. So here's to the harmony, idealism, and companionship of 24 and to your long-term security.