Most Nigerians who have never traded before go right in due to the fact that trading in the foreign exchange market is available to them at any time, any day of the week.
These traders are quick to act on market changes in response to fresh economic data. Unfortunately, even the most resilient traders could eventually be worn down by such an approach.
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Unlike Wall Street, which is only available during business hours, the foreign currency market follows the trading schedules of four time zones around the world, making it accessible around the clock, five days a week.
Nigerian traders must familiarise themselves with the market's opening and closing times and set attainable goals accordingly. Read on to find out how.
Table of contents
Different market sessions
If one goes by the time that is used in Nigeria, the most profitable (or volatile) period to trade foreign currency in Nigeria is between the hours of 14:00 and 18:00. This is because of the standard time that is used in Nigeria.
During this time, the trading periods in London and New York begin to coincide, bringing with it an influx of market activity and opportunities in both locations.
The New York session
The New York session is active from 8 am to 5 pm Eastern Standard Time (EST), and it is the second busiest in the world for trading foreign currencies. Ninety percent of all deals are conducted in US dollars during this time.
The New York Stock Exchange (NYSE) may have a significant and immediate impact on the value of the dollar. For instance, the value of the dollar could unexpectedly increase or decrease as a direct result of corporate mergers and acquisitions.
The Tokyo Session
The markets in Tokyo, Japan, which opened first in Asia, are open from seven in the evening until four in the morning.
This is the longest trading session in the continent. As a consequence of this, the Tokyo market accounts for the greatest proportion of economic activity in Asia, surpassing both Hong Kong and Singapore in this regard.
There is a great deal of business conducted in the exchange of the US dollar and the Japanese yen, the British pound and the Japanese yen, and the Euro and the US dollar.
When only the Tokyo market is operating, it is especially important to keep an eye on the USD/JPY exchange rate due to the strong influence that the Bank of Japan (Japan's central bank) has on the market.
The Sydney Session
Five o'clock in the evening marks the beginning of the trade day in Sydney, Australia, which continues until two o'clock in the morning.
Despite the fact that these represent the smallest megamarkets, when the markets reopen on Sunday afternoon, there is a rush of early activity. This is despite the fact that individual traders and financial institutions have been trying to recover from the long holiday since Friday afternoon.
The London Session
The United Kingdom (UK) is in charge of the international financial markets, with London serving as the most important component (open from 3 am to noon). According to figures provided by the BIS, London is responsible for 43 percent of all worldwide business.
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The Bank of England, which is the British central bank, is located in London. The Bank of England is responsible for establishing interest rates and conducting GBP monetary policy, both of which have significant effects on the value of the British pound.
Forex traders that focus on technical analysis would be wise to keep in mind that London is frequently the place where contemporary trends have their beginnings. Technical traders can uncover profitable trading opportunities by studying statistical patterns, momentum, and price action.
Trading on news cycles
Traders are attracted to the foreign exchange market by news of politics, economics, and the financial sector. In spite of the fact that this could put you in the thick of things, you should avoid trading on news unless you are confident in your ability to do so.
Recent releases, reports, news, or updates might potentially wreak havoc on the forex market if they were to come unexpectedly. However, a currency economic calendar may make it simpler to monitor the ever-changing conditions of the global financial markets.
A trader's trading schedule could benefit from an understanding of the markets and the relationships between them. However, the spread of knowledge is an essential factor.
In the event of a sluggish trading day, the stock market could be spurred into activity by some huge news. In the same way, currency values can fluctuate in the minutes following the release of crucial economic data, especially if the data contradicts expectations.
The hundreds of economic statistics that are released every day throughout the world and affect all currencies are not something that a trader needs to keep tabs on.
When it comes to public relations, Nigerian business owners have to decide whether or not news releases are required. When a country has a track record of consistent economic growth, foreign investors are more likely to feel optimistic about its future prospects.
Capital flows into countries with bright economic futures, and hence investment opportunities, boosting the value of the local currency.
It stands to reason that a country with higher interest rates on its government bonds would be more attractive to foreign investors hoping to make significant returns. Still, attractive rates of return or interest go hand in hand with a thriving economy.
Final Thoughts
The foreign currency market is active all hours of the day and night. Nevertheless, there are times of the day when trading in particular currencies is more advantageous.
Therefore, in order for Nigerian traders to choose when and in which trading session they should join, the first step is for them to conduct both fundamental and technical analysis when setting up their trading strategy.
In addition, traders are required to make use of an economic calendar in order to be abreast of upcoming events that may have an impact on their trading.
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