By Sean Hyman

Fridays are a bit odd for every market.

For stocks and commodities, the big-name traders are gearing up for the weekend. They’re buckling down and deciding whether to hold positions when the markets are closed on Saturday and Sunday, or close out everything to avoid any large price jumps over the weekend.

It’s the same in Forex.

While the Forex market never technically closes, active trading only happens 24 hours a day, roughly five and a half days a week.

The Forex market follows the sun around the world. Trading kicks up for the week on Sunday afternoon in the Asian/Australian market. And as you probably guess, Friday afternoon is when the week’s trading starts to wind down when the New York traders start to either close out trades, or simply stop trading for the week.

Slow FX Market = Bad Time to Trade

When Forex trading winds down for the week, you’ll find lower volume, less liquidity and wider spreads (i.e., higher fees for your FX dealer.) This means it’s not the best time to trade currency pairs…even though the FX market technically is still open for business.

I didn’t always know that. You see, I thought that any time the market was open was a great time to trade.

However, eventually I learned that you don’t want to trade when the Asian market first opens on Sunday, and you don’t want to trade in the New York market on Friday afternoons.

Why is that? The big interbanks that provide the volume don’t jump right in with both feet on Sundays. In fact, the volume really doesn’t pick up until Monday morning.

It’s 12 Noon Friday: Do You Know Where Your Trades Are?

The same goes for Fridays. Once the clock strikes noon on Friday, it always better to be out of your trades unless you’re planning to hold them over the weekend.

The volume from the big interbanks starts to fade quickly because these big banks wrap up their week much earlier than your average retail trader. So, it’s very helpful to trade when the big guys are trading, and be out of the markets when they’re not trading.

Tip: If you want to know when the deepest volume is in the currency market, it’s between roughly 3:00 AM EST and 12:00 noon EST. The European markets are open during these hours, and it also covers part of the New York trading session. This is when the market tends to move the most. That means you can secure the best spreads between your buy and sell quotes because the higher volumes mean you pay less per trade.