Craig Harris Stochastics Method

The forex market is the largest financial market in the world, trading around $3.1 trillion each day.
(Every three years, the Bank of International Settlements (BIS) surveys major Forex market participants and then creates a volume estimate based on the information gathered.)
The most recent BIS survey completed in 2007 yielded the estimated volume figure as $3.1 trillion. (This figure represents an increase in volume of about 70% from the 2004 survey.)
The market is open 24 hours a day from 5pm EST on Sunday until 4pm EST Friday. This makes the spot FX market unique to any other market in the world, as trading is available 24-hours a day.
Some interesting facts on the average daily volume of the forex market.
According to the BIS, the $3.2 trillion average daily volume is equivalent to:
• More than 10 times the average daily turnover of global equity markets.

Forex volatility
Since Forex is a highly dynamic market, with lots of price oscillations in a single minute, it allows traders to enter the market many times a day and pull some profit from these numbers of trades.
But this 24 hour market does not necessarily mean continuous volatility in the currencies. Most new traders often misinterpret the fact, that this market can be traded anytime during the working hours of the week.
While there is always a definite movement, traders ideally need an environment of volatility, which may not be present at all the given times.

Characteristics of the Forex market
• Forex is a 24 hour market. It starts from Sunday 5pm EST through Friday 4pm EST.
• Forex trading begins in New Zealand, followed by Australia, Asia, the Middle East, Europe, and America.
• The US & UK account for more than 50% of the market transactions.
• Nearly two-thirds of NY activity occurs in the morning hours while European markets are open.
• During each trading day, the total forex volume is determined by the number of markets that are open and the times each of these markets overlap one another.

New York Market trade times: 8am-4pm EST Europe Market trade times: 2am-12Noon EST Tokyo Market trade times: 8pm-4am EST
Trading volume by geographic location.
(Source: BIS Triennial Survey 2007)

One can see why London is considered to be the world's capital of Forex trading.
It has the largest turnover since it is home to many large banks and funds that are prominent players in the world of currencies.
Overlap of trading zones

• Currencies tend to be most active when the markets overlap. US/Europe Overlap: 8 AM - 12 PM (New York Time) Europe/Asian Overlap: 2 AM - 4 AM (New York Time)

Chart of the overlap zones
Major market zones
Forex Major Market zones - Asia, Europe and USA. (Tokyo, London and New York)
Within each of these main areas there are several major financial centers.
For example, Asia is comprised of major centers like Australia, Tokyo, Hong Kong, Singapore etc. Let us further look at the Major markets in detail –
Asian Zone. (Tokyo Trading Session - 8:00 PM to 4:00 AM (EST) )

• Tokyo is the first major market to open, and many large participants often use the trade momentum there as the benchmark to gauge market dynamics as well as to devise their trading strategies.
• Trading in Tokyo can be thin from time to time; large investment banks and hedge funds are known to use the Asian Session to run important stop and option barrier levels.

Asian Zone
• In this session, USD/JPY, AUD/USD, NZD/USD and their crosses provide good opportunities as liquidity and momentum remains supported from the previous US session into the relatively lighter Asian session.
• But the major activity and subsequent liquidity is mostly concentrated in the British Pound based currency pairs – like the GBP/JPY and the GBP/CHF. There is usually a lot of opportunity in trading these pairs after the 8PM EST open.
• The USDJPY, GBPCHF and GBPJPY are good pairs to trade, as their broad ranges provide short-term traders with lucrative profit potentials, averaging app. 90 pips.
• The GBPUSD and USDCHF are also good choices due to their moderate volatility as they help shield traders from irregular market movements due to intra-day speculative trades.
• But the Euro based pairs (EURCHF, EURGBP and EURUSD) should be avoided until the London session when European traders anticipate the open.
Europe Zone (London Trading Session 2:00 AM to 12:00 PM (EST))

• London is the largest and most important dealing center in the world, with a market share of at least 30% and trading volume around $580 billion.
• Most of the dealing desks of large banks are located in London.
• The majority of major FX transactions are completed during London hours due to the market's high liquidity and efficiency.
• The vast number of market participants and their high transaction value makes London the most volatile FX market among all.
• Traditionally a more volatile market, the London session is a good opportunity to transact in various GBP and EUR based currency pairs.
• Currency pairs like GBPCHF, GBPJPY and GBPUSD present favorable trading opportunities.
• The USDCHF, USDCAD, and EURUSD pairs also exhibit much activity.
• But the volume of the JPY based pairs decline shortly after the overlap period ends, and should not be considered for momentum trades.
USA Zone. (New York Trading Session 8:00 AM to 5:00 PM (EST) )

• New York is the second most important market in FX, with approximately 16 % of market volume.
• New York trading is very liquid.
• In the United States spot market, the majority of deals are executed between 8AM and 12:00PM, when European traders are still active.
• Trading often becomes quite choppy after midday however, as liquidity dries up. As a result, traders tend to pay less attention to market development in the afternoon.
• NY is very much influenced by the US equity and bond markets and pairs will often move closely in tandem with the capital markets.

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The day and time that the currency is expected to have high volatility.
The daily volume figures of the different currencies.
Breakup of the average range in pips

Amplitude Probability Distribution.
In addition, a trader should be aware of the amplitude of the currency’s movements spanning a daily 24 hour day (across the 3 major markets)
For example the data for EUR/USD and the USD/CHF is given below

79.23% chance of 100-150 pip move

3 Days

78.01% chance of 100-250 pip move

5 Day/ Week

81.97% chance of 100-300 pip move