Trading Forex pairs with binary options and spreads provides multiple opportunities for traders who love volatility, and for those who don’t. 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.The Active Zone is where pips are collected. If you like to trade spreads, you can capitalize on large potential moves, especially after the London Open at 3:00 am EDT. If you have a strategy for trading spreads, and you are on the right side of the market, you can have a very nice tracing day in just a few hours. There is also the opportunity to lose nearly as much if your on the wrong side of the trend.You can also trade binaries on the Active Zone. As the market dives or climbs between 2-5am EDT, you can BUY or SELL binary options going with the direction of the trend. It’s not uncommon for the daily low or high to be established during the European and London session, before the opening of the New York markets at 8am EDT.
- 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.The Dead Zone is no time to trade spreads. There simply isn’t enough volatility to collect any meaningful pips. But the Dead Zone offers prime opportunities to trade binaries. Shortly after the 12:00pm lunch hour in New York, volatility leaves the market with several popular currency pairs in the US and Europe, including the GBP/USD, EUR/USD, USD/CHF, and others. If you can stay on the right side of the market going into the Dead Zone, then there can be multiple opportunities to place ITM binary trades, risking $70-$85 per contract. While this may seem like a lot to risk, your probabilities of a successful outcome are also very high.
Tuesday, April 5 was another textbook example of the potential for trading Active Zones and Dead Zones on the GBP/USD:
The Active Zone: Can you see how much price movement happened on the GBP/USD until noon? There were several opportunities to SELL Spreads and binary options during this period.
The Dead Zone: Can you also see how the market flattened after lunch, with no significant moves in one direction or the other? The MACD crossed over from bearish to bullish on the 15-minute charts just before noon. At 2pm with the MACD still showing a bullish bias, the decision was made to BUY from the first strike price below the market, with a 7pm expiry. As you can see this trade risked $79.75 per contract, but the trade never took any heat. Trading the Dead Zone can be great for those who simply don’t like or can’t handle volatility.
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.