From 2am – 7pm, the GBP/USD can offer numerous opportunities for trading binary options and spreads. In the eBook “Best Times to Trade Currencies”, Josh Martinez with MTI divides the Forex trading day into two distinct zones:
- Active Zone (2am – 12pm EDT) – This is when the Forex markets are likely to be most active. The European financial markets open at 2am. The 3:00 hour marks the opening of the London Exchange and the close of the Tokyo Exchange. New York opens at 8am. During this time period, large volumes of financial transactions occur, especially after the open of the London Exchange at 3am. There is the potential for strong volatility, and it can be accelerated on economic news reports out of Europe and the UK , usually between 3-5am. At 8am, the New York Exchange opens, adding more fuel to the fire. During the Active Zone, there can be large swings in many currency pairs to the upside or to the downside.
- Dead Zone (12pm – 2am EDT) – The Forex markets tend to quiet down as the European and London Exchanges close, and the New York Exchange starts to wind down after lunch. The volume of transactions being cleared slows down dramatically, and it’s not uncommon for the market to start drifting sideways, with little movement to the upside or to the downside. While the Dead Zone is not normally an ideal time frame to collect pips, it can provide attractive opportunities for trading binary options.
Thursday, February 11 was a textbook example of the potential for trading Active Zones and Dead Zones on the GBP/USD:
This is a 15-minute Nadex chart of the GBP/USD, and here were the opportunities across the trading day:
- 2:00 am EDT – The European Exchange opens. Brief move to the upside, followed by a sharp move to the downside. Which way will the market go? It’s probably best to wait for the London Exchange to open.
- 3:00 am – The London Exchange opens, and the sharp downturn continued. This provided opportunities to SELL an ITM binary options contract with a 7am expiry from the 1.4500 strike price, risking greater than $50 per contract for a lesser return on a high probability trade. If you believed a an extended dive was in the works, you could have also chosen an OTM binary options contract at around 1.4400, possibly risking $30 or less. If you SOLD a Nadex Spread shortly after 3am, there was an opportunity to pick up 80 pips on the dive.
- 4:15 am – The GBP/USD had already dropped around 100 pips since 2am, and was starting to bounce back up. When the GBP/USD makes a sharp upward or downward move after the London Open, it’s not uncommon to revert back to a Fibonacci retracement level. By 5:30am, the market had ground its way back up to the 50% Fibonacci retracement level. There was an opportunity to BUY a spread from the low and to exit at the Fibonacci target for an additional 20-30 pips, depending on your entry price.
- 8:00am – The market continued to dive from the bounce off the 50% Fibonacci retracement level to form the low of the day shortly after 8am. Shortly after the New York Exchange opened, the GBP/USD shot all of the way back up to the 61.8% Fibonacci target. If you BOUGHT a spread, there was an opportunity to pick up another 60 pips on the climb from the low to the 61.8% Fibonacci target. It was also an opportunity to BUY binary options contracts with an 11am or 3pm expiry.
- 12pm – 7pm – The Dead Zone. After 12pm, the market seemingly ground to a halt and drifted sideways. A binary option contract was sold from a level of resistance established from the 61.8% Fibonacci retracement. It was a good distance from the market, and the trade was never threatened. No real opportunities for spreads, but the Dead Zone can provide ample opportunities for trading binary options.
A full day of trading opportunities can be available on the GBP/USD if you know how to capitalize on opportunities in both the Active Zone and the Dead Zone.