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When attempting to develop a winning currency trading strategy you should initially look at market volatility.
Considering that one can trade currencies (Forex) at any time of the day on a world wide basis you will need to concentrate on specific sections of this vast market and find an area in which you can specialize.
Currency trading system,
Currency trading markets in different countries are obviously influenced by different market conditions.
Currency pairs are all of course subject to market volatility, however most currencies have various volativity levels depending on the time of day. Before you commence currency trading, you must develop an understanding of the currency trading system, which involves the pairing of currencies in various time zones throughout the world, and factors that can influence volatility.
The London Forex or currency trading market is the worlds largest, responsible for nearly one third of the worlds transactions. It is the biggest, most volatile and therefore responsible for many huge profits and of course losses.
For example, if we look at currency pairs such as the British Pound and the Japanese Yen, or the Pound and the Swiss Franc, their volatility can exceed in excess of 140 pips. Currency traders recognise that fluctuations such as these can generate huge profits in short time for smart investors.
Currency pairs,
Volatility towards the conclusion of the London market is influenced by big traders converting their finances to US Dollars prior to the start of the US Forex market which is second in size to the london Market. The US market is buoyant during the morning which is a period where trading overlaps with the European market resulting in a period of very high liquidity.
Currency Traders willing to take risks on high volatility currency pairs during this time will often concentrate on pairs such as the Euro/USD and the US and Canadian Dollars, or the British Pound and US Dollar.
Investors who are more conservative may consider less volatile currency pairings such as the Australian Dollar/Japanese Yen, or the US Dollar/NZ Dollar and US/Australian Dollar
The Asian Market led by the Tokyo Exchange also overlaps the London market.
Many large investors will take their positions in the Tokyo market prior to the commencement of the London session, and we note that the currency pairs of the British pound and Japanese Yen can prove volatile during this period of overlap which is early morning in the US. This slow trading time is often utiled by investors to position themselves in readiness for the opening of the US or European markets.
Currency traders
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