What are the Best Times to Trade Forex in Singapore?
The best time to trade forex in Singapore is between 9 and 12 PM in the evening, as the London and New York markets overlap, creating the best trading conditions.
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Slippage refers to the difference between the anticipated price of trade execution and the actual price at which the trade is executed. Meanwhile, gaps are discontinuities in price movement where no trading takes place.
Both concepts can significantly impact trading outcomes, making their understanding imperative for forex traders. While slippage often happens unannounced, forex gaps commonly occur during the rollover period, particularly after the weekend, creating gap patterns that provide information about potential further market behavior.
In Forex trading, slippage occurs when there is a discrepancy between the price at which a trade is expected to be executed and the price at which it occurs. This difference can be due to rapid market movements or a lack of liquidity. For instance, if a trader places a buy order for USD/SGD at 1.3500, but the trade is executed at 1.3510 due to sudden market movement, a slippage of 10 pips has occurred.
If negative, slippage is problematic because it puts the trader at an immediate disadvantage—using a wider stop loss and tighter take-profit level than anticipated, thus increasing the risk and diminishing the reward.
Several factors contribute to slippage in Forex trading:
Slippage can affect profitability, especially for traders who rely on tight stop-loss orders or those engaged in high-frequency trading. Consistent negative slippage can erode profits, potentially turning profitable scalping strategies into unprofitable ones.
Definition of Gaps: Gaps in Forex refer to abrupt price changes between trading sessions or within a session where there is no trading activity at certain price levels. These gaps are represented as blank spaces on price charts. Gaps often occur when the market is closed, such as over the weekend, and it reopens with a different price due to news or events during the closure.
There are four different types of gaps:
The breakaway gap on EUR / USD after price gaps over resistance, Source: TradingView
There are at least three different causes of forex gaps.
The following strategies can help mitigate the impact of slippage and gaps.
During High-Volatility Periods: Slippage and gaps are more common. Traders should be cautious during such periods, as seen in high-impact news events affecting USD/SGD.
During News-Driven Events: News releases, such as changes in interest rates by the Federal Reserve, can lead to increased volatility and gaps in USD/SGD, leading to slippage.
In Different Currency Pairs: Exotic currency pairs with lower liquidity than major pairs tend to have higher chances of slippage and larger gaps owing to the lower market depth.
Four types of gaps are common gaps, breakaway gaps, runaway gaps, and exhaustion gaps. It is easy to spot a gap, but determining its type requires some experience and a consideration of the larger picture.
Two of the best ways to avoid slippage are to trade a highly liquid pair like EUR/USD, USD/JPY, or another major pair and to avoid trading the news when market sentiment can shift on a whim.
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What are the Best Times to Trade Forex in Singapore?
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