The forex market is a 24 hour market. Never stops except on weekends. Within this 24 hour period different currencies behave in different manners. As a day trader it is very important to know the personality of the currency you are trading. For example, the GBP / USD is more volatile in early to mid European session then any other liquid pair. For a day trader trading in these hours it would be wise to take advantage of the price swings the GBP / USD pair offers instead of trading some other currency pair that constantly shows no movement. The USD / CAD pair is silent in the early to mid European session but starts to have more price movement toward the start of the US session.
Spread and liquidity
Forex brokers do not charge you a commission for every trade you make ( at least most forex brokers ). Instead, they make their profit on the bid / ask spread which is measured in pips. As a forex day trader you are aiming at capturing small price swings sometimes several time per day. Also, your profit objectives are obviously much smaller than the swing traders profit objectives. All this means one thing: every pip counts. You cannot afford to trade currency pairs with large spreads, if you do your profit will get eaten up to a point where you will not be trading with an adequate risk / reward ratio. Forex day trading must be done with liquid pairs. Most forex brokers will provide you with a very narrow spread for the most liquid currency pairs. As an example, many brokers are now offering a 2 pip spread for EUR / USD and USD / JPY and a 3 pip spread for USD / CHF and GBP / USD. These are the most liquid pairs and the ones a day trader should focus on.
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