When we refer to volume, we are talking about how much a currency pair is traded during a particular time. Volume acts as fuel for allowing price action to move. You’ll find that currency pairs face lower trading volumes outside of their currencies’ sessions. These time periods are poorer market conditions for us, especially as traders looking for breakouts. The ideal market conditions are found during the banks’ opening hours. You will learn more about session timing, bank openings and choosing currency pairs under the “fundamentals” section.

How can we see this on the charts?

Volume is easily identifiable — the larger or longer the size of a candle stick, the more trading volume is found within that time period. On the charts, you’ll notice that the larger candles are formed when the banks trading those currencies are open e.g. USD and CAD pairs during the New York session.

The same logic applies to ranges too — the larger the range, the higher the trading volume within that range.

Periods of higher trading volume also benefit us with tighter spreads. Spreads are the difference between the ask price and bid price of a currency pair — the best trading times are when spreads are at their lowest. So every time you get in a trade you typically start at a 1-2 pip loss (depending on your broker, some brokers are bad and start you at negative 5+ pips!). This difference in execution price and price given is known as spread. Spreads can reach highs of 10-20 pips during times of low trading volume or news events, which would take away sizable chunks of potential profit. Hence we do not take positions during these periods.

The green line is the bid line, the red line is the ask price. Some brokers choose to increase the spacing between these two lines to give you a worse price and make more profit from themselves. Having tight or small spreads is key to a scalper trying to catch 15-30 pips at a time. Click here to learn about choosing the right broker

Take GBPUSD for an example — what do you notice about the trading periods marked in purple?

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There are daily periods of low trading volume, tending to happen around the same time. Take note of the fact that these periods are outside of the London Session and the second half of the New York session. GBP/USD sees most of its trading volume between 7am and 4pm EST, right from an hour before the London session opening up to its closure at 4pm.

After 4pm, GBP/USD typically takes a strong hit in trading volume before volumes kick’s back in when European banks re-open. What can we take away from this? It is wisest to trade when the financial centers open up.

Of course, there are occasional days where you will witness higher trading volume during these times, but generally, you’ll want to avoid taking positions during these times in order to avoid market consolidation and false moves.

You’ll also want to avoid trading on bank holidays (depending on the currency pair) for the same reasons — with no commercial banks & financial institutions active in the market, the lack of volume makes for erratic price action e.g. trading USD pairs on Memorial Day, EUR pairs on Christmas Day.

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