What is the best time to enter and exit a Forex trade?

Knowing when to enter and exit a Forex trade is key to successful trading. This skill is mostly acquired with experience, as well as developing your intuition as a trader. In this article, you will learn useful tips and tactics that will lead to better results.

Monday market open: How to capitalize on it? 

In most cases, trading during the market open on Monday is not advisable. It's best to avoid jumping into the first opportunity you notice during the week’s opening session. Instead, allow the market some time to adjust after the weekend, and take the time to conduct a thorough analysis and carefully consider potential trade opportunities.

Here are a few things to keep in mind: 

• Price gaps: usually indicate a sudden change in the sentiment of major players. In most cases, if the gap is small, the price will likely fill it in the first few hours;
• The price action from the Asian session: does it look like a new trend is coming, have previous highs and lows been tested, or has the price been moving without a clear direction;
• Be careful with tight stops: if you think you have a good entry opportunity, then consider your stops carefully. Low liquidity at the beginning of the week may cause unclear movements in both directions;
• Economic factors: in case of news coming up on Monday, or any of the following days, then it is more likely that the price will not find a clear direction until then.

Trading during the European and US sessions

As the initial hours of the market open pass, one of the most active trading sessions begins—the London session (8 AM local time). The European and US sessions drive the highest market volume, making this the prime time to observe significant and more defined price movements.

Additional tips: 

• London open: it often starts with a sharp move that can test certain levels from the Asian session. You can use different trading strategies focused on the start of the European session;
• Day trading or scalping: if you are looking for intraday trades, then trading during the European and US sessions is the best option for you;
• Start of the US session: the New York session opens In the afternoon. At this point, the two most active sessions overlap and lead to a second peak moment, when we can again see higher volumes being traded.

This period of the day is perhaps the best time to enter and exit a Forex trade. In many cases, price action during these hours will result in a signal to enter or a target reached on an already open position.

If you're not yet familiar with market hours, then check out this article:

Friday market close: A time for caution

On Fridays, the market often becomes more unpredictable, especially in the final hours before the close. Many players close their positions, leading to sudden pullbacks in price.  

Here's what you need to know: 

• Holding trades over the weekend: establish clear rules for when you're allowed to hold a trade over the weekend, and when not to. As mentioned earlier, gaps can occur, which also leads to high risks when opening positions over the weekend;
• Last trades of the week: another rule should be present in your strategy - are you allowed to open new positions as the late hours of the US session on Friday approach?;
• Wide spreads: if you are trading exotic or less liquid instruments, then widening spreads can lead to your stop-loss being hit.

Trading before and after high-impact news

News drives not only long-term trends but also short-term price spikes. While it can aid in your overall market analysis and directional judgment, it can just as easily work against you, particularly if you're already in a trade. Trading during news events demands extra caution and attention. 

Useful tips: 

• Economic calendar: check the economic calendar at least once at the beginning of the week to be aware of important events in the market;
• Before news: avoid opening positions just before important market news. Even if you trade in the right direction, the price may form a rejection wick in the opposite direction, and then complete your analysis;
• After news: if your idea is confirmed after the news, wait for the price to get back into rhythm, and do not rush to enter. It's always better to wait for a pullback and another entry than to accumulate losses;
• Patience: If there's a mismatch between the news outcome and the technical setup, hold off and wait, as the market often realigns with the trend at a later stage.

For additional information about trading during news events, you can check out the following article:

Summary

The most important thing to remember is that the best time to enter and exit a Forex trade is during the European and US sessions.

Of course, there are many types of strategies, such as those that are only traded at certain times of the day and those that are only traded during news events.  

Avoid periods of low liquidity, because then currency pairs offer wider spreads and less clear movements.

As traders, we only have control over certain things in our trading, but one of them is when we choose to trade. Follow the tips in this article for more successful trading!