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Friday Forex Trading Tips For Day Traders

Author: Martin Moni
Martin Moni
All publications of the author

The FX arena is often quoted to run 24/5, from Monday to Friday nonstop. This is true, and from Sunday 4PM (EST) to Friday 5PM (EST), you can freely participate in the retail FX arena. This characteristic of the FX arena has made the industry grow into the largest financial arena in the world, but it has also been the reason for sleepless nights among traders. Exchanging on Fridays is especially peculiar because it is the close of the exchanging week before the weekend break. Because Friday is the last day of the exchanging week, there is usually a lot of activity that occurs on this day, and that also presents a lot of exchanging opportunities; as long as you know what to look for. Today, we shall be mentioning some of the events that occur on Friday and how they affect the arenas, plus tips on how you can take advantage of this flurry of activity. By the end, you will be looking forward to the next Friday to make use of the lessons learned.

FX arena time zones explained

The FX arena is often quoted to run 24/5, from Monday to Friday nonstop. This is true, and from Sunday 4PM (EST) to Friday 5PM (EST), you can freely participate in the retail FX arena. This characteristic of the FX arena has made the industry grow into the largest financial arena in the world, but it has also been the reason for sleepless nights among traders. (This is: How to protect yourself from margin call)

How is the FX arena able to operate 24/5?

Some people think that it is us the retail FX traders who make the FX arenas so robust, but that is completely wrong. In fact, as retail traders we contribute very little to the overall average traded volume. It is also from this knowledge that you can begin to understand how the FX arena can remain open 24 hours a day from Monday to Friday. (Concepts Every Trader Should Understand: Leverage, Margin And Hedging)

As early as Sunday 5PM (EST) in New York, there are already some countries whose business hours have begun. This means that the banks and companies in those countries have already started operating on Monday morning. These commercial and central banks as well as companies ignite the FX arena because they immediately start exchanging. Additionally, even the retail FX brokers rely on quotes provided by liquidity providers participating in the interbank arena to execute trades. Here at the interbank arena, it is such parties as the banks and companies who participate. Therefore, when they open their doors on Monday morning, the FX arena finally comes to life. (FX Rigging And Manipulation: How The Major Investors Pull It Off)

Remember, as retail FX traders, we make a very small impact on the FX arena but these other big players have the most impact. Later on, we shall see how you can spot arena activity by these big players on Friday and how to take advantage of this. (Have you ever asked yourself: Can A FX Broker Avoid Sending Trades Directly To The Interbank Arena)

As the day wears on, more and more countries also enter business hours and those countries’ banks and companies also start to participate. In the first 8 hours or so from the time the FX arenas opened, the first session ends. In this first session, several countries are covered, but the most significant are Australia and New Zealand. As a result, this FX exchanging session is referred to as the Sydney session, ending at Monday 1AM (EST). (Learn this: FX Exchanging Formula Based On the Most Dynamic Cross)

Even before the Sydney session is over, the people of Japan wake up Monday morning and the industries of the country also come to life. This is at about Sunday 6PM (EST) and running through to Monday 3AM (EST). During this time, the FX exchanging session is referred to as the Tokyo session because that is the most active city. The overlap between the Sydney and Tokyo sessions ensures that the FX arena keeps on running smoothly even as one city goes to sleep. (You should know: How to trade on the NYSE)

Then comes the London session, running from about 3AM (EST) to 12PM (EST). This exchanging session fits perfectly with the Tokyo session, again ensuring the arenas keep running smoothly. Finally comes the New York session from 8AM (EST) to 5PM (EST). Again, the New York session will overlap with the Sydney session on Tuesday, keeping the cycle going. It is only until Friday when, as New York goes to sleep and the people of Australia are enjoying their weekend, that the FX arenas finally come to a halt. (Discover everything about: What is ECN)

Why is this important to know?

Every trader should be aware of the FX arena time zones because they have a huge impact on arena volatility. For example, the Sydney session is the quietest, even while it runs simultaneously with the Tokyo session. During this time, arena prices don’t change much unless there is a major news announcement. (You’re probably curious about: How to create your own FX brokerage firm)

However, arena volatility picks up during the London session and intensifies during the overlap between it and the New York session. This is the perfect time to trade because there are a lot of price movements and opportunities to trade. (Try to use one of these: Breakout exchanging strategies)

Nevertheless, you should never ignore the Sydney and Tokyo sessions as these have the ability to set trends that remain for the rest of the day. As traders start operating in London and New York, they look to the Sydney and Tokyo sessions to determine arena trends, which they then push further. (Simple: FX strategy on based on MAs)

Besides the general reasons mentioned above for knowing the arena time zones, there’s an even more pertinent reason when it comes to exchanging on Friday – timing is critical. All the above times have been shown in EST, but you may be living in a different time zone, which means that your clock may be slightly different. For example, someone in Australia will need to adjust their clock or be aware of the time difference in order to trade perfectly for Friday. (All About The Donchian Channel FX Exchanging Strategy And How To Use It)

How do you know your broker’s server time?

Before going any further, it is important to help you know exactly when you can expect the arenas to open and close. Those times shown above describe the general times when the FX arena open and close, but they may vary in your particular case depending on the location of your broker. You see, since it is your FX exchanging broker who processes your trades, the time you should expect the arenas to open and close will depend on their location. The best FX brokers will often have several servers located around the world to cater to the varying needs of their clients, but it is still important to know the exact time so that you can plan well. As you’re going to see in this article, every minute counts when you’re exchanging on Friday, so it is crucial to understand the timing. (Here are the: Most common questions FX traders ask)

The quickest way to find out what time your broker’s server is on is through checking the ‘Arena Watch’ window on your MetaTrader platform. This feature is found on both MetaTrader 5 and 4, but the placing of the server time may be different when you’re working with different FX exchanging platforms like cTrader. This window displays the time zone that your broker’s server is running on. If you’re lucky, your broker should have a server in the same time zone as you’re in, which would make things easy for you. Otherwise, you may have to calculate the time difference manually or using a technical indicator that does he job for you. If you’re in such a situation, we’ve included a clock indicator at the bottom of this article that you can download for free. (How to trade with cTrader)

Some FX brokers may also provide this information on their website so that their clients are aware of the timing. The example below is a screenshot from the XM.com website showing exchanging hours in GMT. (Is It Time To Upgrade To Metatrader 5: Features Of MT5)

What you should look out for on Friday

We hope by now that you’re convinced Friday exchanging is essential to every trader, but now we have to show you how you can actually trade on this day. To do so, there are a number of things you have to look out for on Friday. Once you have mastered all of them, then you will be a much better trader on Fridays than ever before. (Here are the: Fundamentals of fundamental exchanging)

Economic news

There are always news announcements all through the week, sometimes even over the weekend. Nevertheless, there are a few very important news announcements that happen only on Fridays, and you should know all of them. (Some of the: Best tips on working with Myfxbook)

Commitment of Traders (COT)

The first and most important is the COT statement that is published by the CFTC every The last day of the week between 2:30PM and 3:30PM (EST) depending on the season and Daylight Savings Time. The data is acquired by the CFTC from various futures exchanges, mainly the Chicago Mercantile Exchange (CME). It is nearly impossible to know the positions taken by retail traders in the FX market because it is a decentralized market. So instead of guessing, the CFTC takes data from futures exchanges where the information is centralized. In the us the CME is the most prolific futures exchange for currency. When the information is published, anyone can get it from the CFTC website looking like the image below. (Here is: All you need to know about futures contracts)

This statement shows the ratio of traders taking long and short positions on the EUR/GBP pair all through the week and the changes from the previous week. At first, the table may look like gibberish, but you only need to know where to look. The most important category to us traders are the non-business traders. This category represents investment banks, fund managers and other institutions that speculate and earn on price movements. Business investors include multinational companies that are interested in the futures themselves but not for speculative purposes. For example, a company like Volkswagen may be interested in EUR/GBP futures because they want to be sure of the exchange rate between the euro and sterling pound for when they export their cars from Germany and into the UK. This group of investors, business, do not really reflect market moves because their investment is long term. Fund managers and the like, on the other hand, will be interested in the weekly shifts in exchange rates so that they can make money out of it. (Find out more about: FX exchanging using COT statements)

Let’s take a look at the example above and try to decipher what the markets said about the euro and sterling pound. According to the data from non-business investors, there were a lot more short positions than long, 8,762 to 23,574 – almost triple! This showed that a majority of investors believed the euro was weaker than the pound. Moreover, the number of long positions had decreased heavily from the past week, showing that confidence in the euro was going down. If you were to receive this information on The last day of the week afternoon, you would have learned that the bulls were pulling out and that the EUR/GBP pair would be going down. (You should be: Looking for market correction)

It is worth pointing out, however, that exchanging based on the COT statement is more suitable for long-term investment rather than short-term trades. That is because these major institutional investors usually make long-term investments for their clients and not short-term ones. As a retail FX trader, it is also possible for you to make similar long-term investments if you prefer and they can also be very profitable if you understand positional exchanging. Additionally, data from COT statements can be used on many currencies since it is not just available for this particular pair. Futures are available for plenty of other currencies, and these can be used also for exchanging on The last day of the week and the coming week. (You ought to: Learn How To Use Position Exchanging In The FX Market For Profit)

Non-Farm Payroll (NFP)

In the US, non-farm payroll (NFP) data is announced on every first The last day of the week of the month by the US Department of Labour. There is also a preliminary NFP statement released on the third week of the month. The information from NFP data represents lack of employment figures in the US for a majority of the industries except farm workers. Typically, when there is increasing lack of employment, it indicates that there is less economic activity since unemployed people cannot purchase goods and spend. This means that whenever NFP data shows increasing lack of employment, it indicates that the US economy is on a downturn. Because NFP data covers such a large proportion of the US economy, it is a very important measure and thus it has a huge impact on the value of the US dollar every time it is announced, whether for the good or bad. To see just how much of an impact the NFP data release has on the US dollar, check out the image below highlighting all the NFP releases so far this year. (Discover: How to draw S/R levels like a pro)

As you can see, every time there was an NFP release, there was also significant market activity during that day. In fact, we could have also highlighted the incidences where the preliminary statements are released too, and they too have a major impact on the markets. (Behold, the: 5 secrets of Divergence in FX)

Apart from just currency pairs with the US dollar in them, NFP data also has an impact on other markets as well. Indices in particular are heavily affected by NFP data, especially US-based indices like the S&P 500 and Dow Jones Index (DJI). These indices track stock prices for the top companies in the US, and because NFP is a reflector of the US economy, these indices can experience a turbulent exchanging day. (All you need to know about: Exchanging stock indices)

Commodities are also affected, especially gold that is often inversely related to the value of the US dollar. Generally speaking, the value of gold usually goes down when the value of the US dollar goes up. This is because investors shift their money from indices and into gold when they fear that the US economy is going to hurt. On the other hand, investors will put their money into indices and sell their gold assets when the US economy is booming. The latter situation can be observed this very moment when the value of gold has dropped significantly since the beginning of the year. The US economy has been experiencing a boom for almost two years now since the election of President Donald Trump. As a result, gold’s value is going down as that of US indices like the S&P 500 keeps going up as the image below shows. (Ask yourself: Can you quit your job to become a full-time FX trader?)

Now you can see just how many avenues of exchanging you can take advantage of simply from the NFP data announcement. Exchanging with the US dollar currency pairs is straightforward since all you need to know is that higher lack of employment means a weaker dollar. For example, you should sell the EUR/USD pair when the lack of employment rate goes down because the US dollar will become stronger than the euro. With indices, these are directly proportional with the dollar value, so you would buy the S&P 500 and Dow Jones if lack of employment went down. A commodity like gold would be inversely proportional, meaning that you would sell gold when lack of employment went down. All these exchanging instruments are available even through a FX broker, although as CFDs rather than direct commodities or indices. Nevertheless, there are many benefits of exchanging using CFDs over direct assets as we discussed in a previous article. (Have you ever asked yourself: Should You Invest In CFDs Or Stocks To Make More Money?)

The NFP announcement is usually announced on The last day of the week between 8:30AM and 9:30AM (EST). The exact time will vary depending on the season and whether Daylight Saving Time (DST) is active or not. As mentioned earlier, you can calculate this time manually or using the technical indicator. Fortunately, we even offer the FX economic calendar for you to keep track of NFP announcements. (You should know: How to work with the economic almanac)

Weekly candlestick pattern

You remember how we mentioned at the beginning that the Sydney and Tokyo sessions are important because they set the trend for the rest of the day through the other trading sessions? Well, trends occur even on the candlesticks themselves, and the weekly candle tends not to change on Friday because the trend has already been set. Once the weekly candle has assumed a particular shape, it is unlikely that it is going to change regardless of the occurrences or news announcements of the day. There is a figure above highlighting all the NFP announcements of the year, including the most recent one on the 3rd of August 2018. On that day, the Bureau of Labour Statistics reported a marked decrease in unemployment from 248,000 to 157,000. That was excellent news for the US dollar, and you should have expected that the EUR/USD chart would move sharply to the downside. Now let’s look at what actually happened on an hour-to-hour range when the news was announced:

The blue rectangle shows the entire trading day that Friday with emphasis on the NFP announcement at 3:30PM. You can see that the news was indeed great for the US dollar, but that the overall trend for the entire day did not change all that much just because of the NFP announcement. In fact, the overall trend remained a bit flat, and that could be attributed to the flatness of the weekly candlestick as well. (Learn from: The Most Prominent Cryptocurrency Hacks and Scams You Should Know About)

The image above shows you that the weekly candle for that week when the NFP data was announced was bearish. The long wick above indicates that the bears had bought out the bulls, while the very small wick at the bottom shows there were no bulls left to compete against the bears. Considering that, plus the positive NFP news for the US dollar, the candlestick should have dropped even further, but it didn’t. This tells you that, the weekly candle is unlikely to change on Friday regardless of the news announcements that come out on that day. (These are the: Best technical indicators and how to use them)

So, what can we do with this knowledge? Well, we need to look at the weekly candle on Friday to determine how the markets will move. For example, if you find that the weekly candle is already bearish, that means there is little chance prices will go up on Friday. Therefore, you should not look for buying opportunities that day, but rather focus on the selling opportunities. If you do find any buying opportunities, they are unlikely to change the shape of the weekly candle anyway, so perhaps it could only be useful for scalping but you should not expect any major upside moves. Major news announcements during the day may even cause a spike to the upside, but the overall trend will force the candle to regain its initial shape and remain bearish. (Learn how to use this: Forex speedometer extreme scalping system)

An ideal cut-off point to determine the shape of the weekly candle should be between 5AM and 7AM (EST). When the shape is definitive like a marubozu, then you should absolutely not try to trade against this candle. On the other hand, if you see a weekly candle being indefinite like the doji or spinning top, then you can feel free to trade in either direction. (Here are the: 7 Powerful Candlestick Patterns to Learn and Understand)

Momentum

Understanding how to trade on Fridays goes beyond the current week and even into the next because of the momentum created during the week that even the weekend cannot break. In particular, we need to focus on the candles that form from between 9AM and 10AM up until the markets close for the weekend. The momentum created by these closing candles is usually carried forward onto the new week, at least for the first half of Monday or sometimes even beyond. Part of the reason for this cause of momentum is human nature, whereby we’re more likely to do the same thing we did the last time. In this sense, traders are more likely to keep trading in the same direction rather than start by going in the opposite direction. (Uncommon technical indicators: you can use on your trading strategy)

The most significant reason, though, is that it shows where the big money is pointed. First of all, we have to acknowledge that the most significant market moves are caused by the major players in the market. These large institutional investors try to avoid risk at all costs, so when you notice a clear change in trend, you know that they are involved. Furthermore, if these investors pump money into the market at the last minute, it shows that they are confident of their investment and that nothing unusual will happen over the weekend. In light of this, you can also follow the wave and trade in the same direction as these traders. Also because they’re trading during the final hours of the trading day, it is more likely that they are traders in London or New York. That should give you confidence that the trend will remain at least until the London session on Monday. That should give you half a day of comfort on Monday before those traders get back to their trading desks. (Find out: How to create a trading strategy)

Closing for the weekend

A lot of people like to close all their positions on Friday in preparation for the weekend. Mostly, this is psychological and not analytical, where people like to enjoy their weekends without anything hanging over their heads. This can also have an impact on the markets when traders close out their positions in mass. Say the whole week and day has been bearish, and then in the final 6 hours you begin to notice that the trend seems to be changing and even looks like it may become bullish. Do not fall for this in the late hours of Friday, because it is just a consequence of traders closing their positions.in a bearish market, sellers may begin to close their positions, which makes the long positions seem to overweigh the shorts. Keep an eye on this phenomenon and you’re going to understand how it happens. (To make money, follow the: 10 steps of successful traders)

When is the best time to place orders with this information?

All through this post, we have been discussing how you can acquire information about the markets on Fridays only and why. However, the question on when exactly to place the orders to the broker has not been addressed, has it? So, should you place your trades based on the weekly candle, toward the end of the trading day or wait until Monday? This would depend on your own trading strategy, most of all, but the most recommended time is to wait until Monday. (Find out more about these: Simple Day Trading Strategies You Can Use In The Forex Market)

Let’s say you’re an intraday trader that makes sure to close all your trades before the end of the trading day. That strategy is great because you don’t have to pay overnight swaps and it also allows you to enjoy your weekend without biting your nails. In this case, you can use the signals from the weekly candle and the others we have discussed to place orders in the second half of the trading day on Friday. The problem is that, unless you read all the information accurately, you could end up on the wrong side of the markets and lose money. Add to that, increased trading activity toward the end of the trading day could increase the chances of slippage and wider spreads. Basically, you could experience some unappealing trading conditions. (Get the: 10 Most Important Resources to a Cryptocurrency Trader)

The best way to go about utilizing this information is to sit on it until Monday when you get confirmation to your analysis. In the Forex market, only fools rush in. Patience is very important to avoid making any mistakes and greed can lead you to make foolish decisions. By waiting until Monday, you can know for sure whether you were right and then place your orders with confidence and less chances of mistakes. After all, remember that you have at least half a trading day to analyze the markets once again for any signs you missed. Who knows, maybe the weekend blues may have made you see ghosts. (How to choose a Forex broker: basic rules and useful tips)

What about leaving your trades open like the hedge funds? A lot can happen over the weekend that a hedge fund can sustain but you can’t. In the past, we discussed about the weekend gap and how you can use it to your advantage. This weekend gap is a kind of disconnect observed between Friday’s closing price and Monday’s opening price. This happens because there may be no buy or sell orders on Monday at Friday’s closing price. As a result, the markets automatically pick the closes quotes and run with them. Gaps are usually not significant, but they have been known to jump several pips. Even though this is not common, why take the chance. A wide enough gap can cause you to be stopped out when markets open on Monday, causing you to lose money for no reason. Large institutional investors can weather even the widest gaps because they have a lot of capital, but for most of us that would mean getting hit with a margin call… and on Monday morning no less. (This is the: Secret of Monday's Gap Trading)

Download Clock indicator for free

After all this, you may be looking forward to the next Friday, but here’s someone who hates Fridays:

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Risk Warning: Your capital is at risk. Statistically, only 11-25% of traders gain profit when trading Forex and CFDs. The remaining 74-89% of customers lose their investment. Invest in capital that is willing to expose such risks.
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