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As The Forex Turns

-- by Stubby Candles

Astronomers tell us that the Earth spins on its axis at 776 miles an hour, while orbiting the sun at 67,000 miles an hour. Meanwhile the sun is orbiting the center of the Milky Way at 500,000 miles an hour, while our galaxy is moving through space at more than 1.2 million miles per hour. Getting dizzy yet?

Back to Earth. Let's throw a dart at the clock and see what's happening as testosterone-driven Forex traders the world over joust for pips and attempt to knock each other off their trading horses and rob the other guy of his daily bread. Remember, this is a billion-dollar-a-minute game.

At 3:00PM New York time it's 8:00PM in London and 9:00PM in Europe. Brokers have long since closed up shop and gone home, while in the Pacific rim it's still 4 hours before the Japanese and Australian markets open. This is the "twilight zone" for New York traders, when the casino is quiet and you can usually expect stubby candles (sounds like a good name for a country & western Forex trader!).

Fast forward to 5:00PM in New York as Big Apple brokers already have one foot out the door. Meanwhile, it's 5:00AM in the Pacific Rim as Asian brokers are just turning off their alarm clocks.

By 7:00PM in New York, Asian brokers have begun their work day (if you can call trading work) and it's already midnight in England.

At 1:00AM in New York the east coast is fast asleep and it's already 6 hours into the Japanese/Australian day as Asian brokers are just returning from lunch (while automated trading systems were left to mind the store, often resulting in a choppy, sideways lunchtime market), while in London it's 6:00AM and British brokers are just rising, while Swiss brokers are already on the bus to work.

Six hours later it's 7:00AM in New York as Big Apple brokers get on the subway to downtown, but in England it's 12:00 Noon already as Limey brokers head to the pub (there's one on every corner) for a pint to wash down their fish and chips.

By 12:00 Noon in New York, Big Apple brokers are heading to the nearest deli for blintzes and cream cheese as London brokers turn off the office lights and get on the bus back home. In Asia it's already midnight and Japanese brokers are counting pips to try to get to sleep. See a pattern developing here?

Once every 24 hours the Earth rotates on its (her?) axis. With each passing hour one financial market swings into the light of a new dawn as another retires into darkness. Which is why a good Forex trader needs to be aware of exactly where the casino is open at any given hour of the day.

Unlike Las Vegas which never closes, the Forex slows down during the "twilight zones" and speeds up during daylight working hours in active trading markets. In fact, there's often a spike in activity during the last hour of the workday as brokers unwilling to leave the office with open trades close out their positions before calling it quits. On Friday afternoon, top Manhattan brokers leave work early and head for the Hamptons, leaving subordinates to play with the remaining pips, resulting in desultory action prior to the Friday close. Don't ever forget to take these circadian cycles into account in your own trading.

Incidentally, a recent Time Magazine poll asked Americans why we have a 24-hour day. Nearly 50% answered that it's because the Earth goes around the Sun once every 24 hours. Uh, huh. If that were actually true, the Earth would have flung off into space millions of years ago at hypersonic speed and people like these would never have evolved. ;-) . Such answers do not inspire confidence in the public fool, er, school system.

But I digress! Back to the Forex. Review the following list of opening and closing times until you have them memorized, and envision yourself collecting pips around the clock. All times shown are New York time (-5 MT).

8:00AM New York opens, London back from lunch, Europe goes to lunch
9:00AM European brokers back from lunch
11:00AM London closes, brokers head home
12:00PM Europe closes, New York goes to lunch
1:00PM New York back from lunch
2:00PM Asian brokers sawing wood
3:00PM Asia closes, brokers head home
4:00PM New York closes, brokers head home
5:00PM Asian brokers arise
6:00PM Asian brokers en route to the office
7:00PM Japan/Australia opens
10:00PM London brokers sawing wood
11:00PM Asia goes to lunch, European brokers sawing wood
12:00AM Asia back from lunch
1:00AM London brokers arise
2:00AM London brokers en route to work, European brokers arise
3:00AM London open, Asia closes, European brokers en route to work, New Yorkers sawing wood
4:00AM Europe opens
6:00AM New York brokers arise to a new trading day
7:00AM New York brokers en route to work, London goes to lunch
8:00AM New York opens, London back from lunch, Europe goes to lunch
9:00AM European brokers back from lunch
11:00AM London closes, brokers head home
12:00PM Europe closes, New York goes to lunch
1:00PM New York back from lunch
2:00PM Asian brokers sawing wood
3:00PM Asia closes, brokers head home
4:00PM New York closes, brokers head home
5:00PM Asian brokers arise
6:00PM Asian brokers en route to the office
7:00PM Japan/Australia opens
10:00PM London brokers sawing wood
11:00PM Asia goes to lunch, European brokers sawing wood
12:00AM Asia back from lunch
1:00AM London brokers arise
2:00AM London brokers en route to work, European brokers arise
3:00AM London open, Asia closes, European brokers en route to work, New Yorkers sawing wood
4:00AM Europe opens
6:00AM New York brokers arise to a new trading day
7:00AM New York brokers en route to work, London goes to lunch
8:00AM New York opens, London back from lunch, Europe goes to lunch

... and so it goes, "As The Forex Turns"!