A Guest Post by FXTM
Forex markets trade around the clock (except at weekends) but there are times when currencies are so quiet that they may as well be closed.
Quiet periods for forex markets tend to coincide with major stock markets being closed. It’s during these times that the big market players are not at their desks and forex trading all but grinds to a halt.
These quiet periods are the perfect time to get prepared for the next day’s trading session. When trading resumes, you’ll be ready with a plan of action, to trade the markets according to your strategy.
Check the news
The first thing to do before markets open is to check all the news from the night before that could affect the way markets trade. Delve into the financial papers and look for the key events that might affect your chosen market. It’s then a good idea to look at the trading calendar for the upcoming day. (If it is the weekend, you can check the calendar for the whole week).
There are numerous places to find calendars online. All you have to do is to search in google for the phrase ‘economic calendar’ and a whole list of resources will come up.
Take a note of all the economic releases and news events that affect your chosen trading pair and write down the time of the release.
For example, if you trade GBPUSD, make a note of any economic releases from the UK or US. Forex calendars do a good job of indicating which events are important and which are not so widely watched but it is important to do this research yourself too. Pay particular attention to central bank speeches and announcements.
Calculate your levels
The next thing is to calculate the important levels in the market. Pivot points, Fibonacci, support and resistance levels should all be calculated before the trading day starts so that you can be ready to trade when the market hits those points.
If you trade with a system you can also calculate the levels which would force your strategy into action. That way you might be able to predict the trade before the event actually occurs.
For example, let’s say that you trade a moving average crossover. Since MA’s can be calculated using the open or close price you can get the calculation ready in advance. That way you will know what price would force a moving average crossover to occur.
If the market is significantly above that level then you may be able to enter your trade early, confident that the crossover is almost certain to occur.