Forex trading offers many opportunities to profit from the market, and scalping is one of the most popular ways to do so. Scalping is a trading strategy that involves opening and closing positions rapidly, aiming to profit from small price movements.
However, the success of a scalping strategy depends heavily on the time period chosen for trading. In this article, we will explore the best time periods for scalping in forex trading.
Time Periods for Scalping
Scalping is a trading strategy that requires traders to make quick decisions based on technical analysis. The choice of time period depends on the technical strategy employed by the trader. Some scalpers prefer choppy, directionless markets, while others prefer strongly directional, highly liquid and volatile markets. The two types of markets offer different environments where different strategies will bear greater profit.
The New York, London, and Frankfurt markets are all open between 1 pm and 3 pm EST. During this period, there are a number of important news releases, and option expiries also take place. This is by far the most liquid and volatile period of the trading day, and requires appropriate scalping strategies for exploitation. During these two hours, micro-trends proliferate, and rapid and sharp directional swings are commonplace as many market events and news releases stir the waters of the forex market repeatedly.
In order to exploit these movements effectively, the scalper must possess a reliable technical approach which can be used to exploit rapidly changing conditions. It is a good idea to be alert, and if caught in the middle of a strong trend which we have guessed correctly, there’s no reason to avoid exploiting it to the full. If we decide to build up positions in this period, we may move stop-losses gradually to breakeven for our trades so that some of them can be left to run for as long as they can.
The period between 5 pm and 7 pm is the quietest part of the trading day. Almost all major markets are closed, and while trading is still continuing, activity is subdued significantly. This is the golden sixth of the scalper who prefers calm and slow markets where small, directionless oscillations can be exploited with great effectiveness. During this one sixth of the trading day, scalping strategies can be employed both manually and through automation by traders who seek rapid and low-risk profits.
The first part between 3 pm and 5 pm is more suitable for scalpers who prefer some volatility in the markets to realize more sizable profits. On the other hand, since many banks in the U.S. are still open during this period, volatility and risk are somewhat higher than the following period.