The Insomnia Trade

In Blog by Michael Arnold

iStock_000014907072_Medium-300x216Often ignored by U.S. based traders, the overnight Forex (FX) markets are a source of consistent volatility and volatility can be a trader’s best friend, especially when trading in the safety of the risk-controlled Nadex binary options environment. The global FX markets are the largest markets in the world, reaching $5.3 trillion in daily traded value in January of 2015 (source: Reuters).  Nadex offers 10 FX “pairs” (one currency verses another currency, represented by a single price) of binary options and 8 pairs of Nadex spreads with the same limited risk and limited profits characteristics of all their products. While it’s true the FX markets are a 24 hour market, it should be noted that not all hours trade the same, and for those of us that suffer with the occasional bout of insomnia, these options can make those hours productive.

Liquidity providers exist in the 3 major financial centers of the world, Tokyo, London and New York, but if New York is the heart of the world’s stock markets; London plays the same role in the FX markets. When the markets roll from the Tokyo liquidity providers to the London providers, volume and volatility often spikes and price moves become more dramatic. Approximately 35% of the daily FX volume trades during the London hours with the majority of that volume happening during the overlap of the London and New York hours. During Central Standard Time, the London FX markets open at 2:00 AM CST and close at 10:00 AM CST. The New York markets open at 7:00 AM CST leaving a 3 hour overlap of volume. So, given the volume increase at the London open and the overlap of the New York market, a trader with insomnia (or a day job) could focus on these very meaty trading hours to trade their Nadex account. Keeping in mind that Nadex is a CFTC regulated exchange, traders can trade FX in the safety and transparency that the CFTC requires.  So, don’t pace when you can’t sleep, study the FX markets and use the night to make your trading right.

Futures, options and swaps trading involve risk and may not be appropriate for all investors. Past performance is not necessarily indicative of future results