When to Trade — When to Stay Out

[madtrader]

When to Trade — When to Stay Out: A Deep, Practical Guide for Traders

Timing is a core edge. Not every hour, session, or chart condition is trade-worthy. The difference between a profitable trader and an active losing trader is not how many trades they take — it’s which trades they take and when. This article gives you a detailed, systematic framework to decide when to trade and when to stay out, with concrete rules, time windows, checklists and worked examples.

Big-picture logic
Markets are driven by liquidity (where orders sit), volatility (how fast price moves) and participants (who is trading). Good timing aligns these three:
Liquidity concentration (institutions, marketmakers) produces cleaner, higher-probability moves.
Right volatility means enough movement to reach targets but not so much that stop losses are random.
Recognizable market structure (trends, ranges, breaks) allows rules to be applied consistently.

If any of the three is missing, edge declines and risk of random losses rises.

Session windows — when the market is most tradable
Below are standard session definitions in UTC+00:00. Adjust for daylight savings if required (noted where relevant).

Tokyo / Asian Session
⏵ UTC+00:00: 23:00 – 08:00 (main liquidity often 23:00–02:00 UTC)
⏵ Characteristic: lower liquidity for major FX pairs, choppier price action. Exceptions: JPY crosses, pairs with Asia-led liquidity, and crypto (24/7).

London Session
⏵ UTC+00:00: 07:00 – 16:00 (most active 08:00–11:00 UTC)
⏵ Characteristic: heavy institutional flow, high liquidity. Many clear directional moves begin here.

New York Session
⏵ UTC+00:00: 12:00 – 21:00 (most active 13:00–16:00 UTC)
⏵ Characteristic: continuation or reversal of London moves; major news releases occur here.

Key overlap (best single window)
⏵ London–New York overlap: UTC+00:00 ~12:00–16:00. Highest combined liquidity and volatility; most “clean” trends and reliable breakouts occur here.

Rule of thumb: Prefer intraday trades during the London session and the London–New York overlap. Be selective in Asia unless trading JPY pairs or range-break strategies designed for low liquidity.

Concrete: Best times to trade (prioritized)
Session open impulse — first 60–120 minutes of London or New York sessions.
Overlap window — London + New York overlap (UTC+00:00 ~12:00–16:00).
Post-news verified moves — 10–30 minutes after high-impact macro prints, if market structure becomes clear and isn’t just noise.
Clear breakouts after consolidation during active sessions (volume confirmation, sweep of liquidity, not just a one-bar spike).

When to avoid trading (and why)
Low-volume Asian hours for majors — price tends to chop and give false signals.
Right before major macro releases (NFP, CPI, FOMC) — price can gap or spike unpredictably. Exceptions: defined volatility playbook with strict hedges.
Midday lulls after initial session impulse — often flat ranges and low edge.
On unclear structure / messy price action — wide, overlapping candles, no clear swing highs/lows.
During market holidays or early close days — liquidity is thin; spreads widen.

Pre-trade checklist
Time window OK? (London / NY open or high liquidity event)
Major news? (No significant release within ±30 mins)
Higher timeframe structure clear? (H4 or Daily trend / range)
Trade idea defined (entry, stop, target) — use price levels, not indicators only.
Risk per trade ≤ planned % of account (see position sizing).
Reward : Risk ≥ your minimum (e.g., 1.5–3:1 depending on edge).
Catastrophic stop capability confirmed (can you absorb worst-case slippage?)
Exit rules set (profit-taking scale or full exit)
Trade logged in journal immediately after (reason, setup, time, bias)

Position sizing — exact worked example (step-by-step)
Use a fixed % of equity for risk per trade (commonly 0.5%–2%). Example uses 1% risk.
Assume:
Account size = $10,000.
Risk per trade = 1% of account = $10,000 × 0.01.

We compute digit-by-digit: 10,000 × 0.01 = 100. So maximum $100 risk on this trade.

Generic position-size formula:
Position size (units) = (Account Size × Risk%) ÷ (Stop Distance in price units × Value per price unit per 1 unit)
Always recalc pip/value for cross rates and for instruments (stocks, futures, crypto) — adapt the “value per price unit” accordingly.
Money Management is much more important than a strategy. You should learn Money Management before trying any strategy.

Order types & execution rules
Limit entries at confluence levels (support/resistance + liquidity sweep zone) — better price and less slippage.
Stop orders for breakout entries — use when you want to enter only after momentum confirms.
OCO (One Cancels Other) for scaling / invalidation management — reduces manual errors.
Avoid market entries during major news due to slippage/gap risk, unless your plan accounts for it.

Trade management & exits
Initial target: defined by structure (previous swing, ATR multiples, measured moves).
Scale out: consider taking partial profits at the first reasonable target, let the rest run with a trailing stop.
Stop relocation: only move stop to breakeven after a predefined profit multiple reached (e.g., after +1R or after price clears a new structure). Don’t move stops based on emotion.
If price returns and breaks your entry zone invalidating the setup, exit — the market changed.

Strategy-specific timing tweaks
Trend-following: prefer strong sessions (London/NY) and avoid Asian low-liquidity hours. Enter on retracements that align with higher timeframe trend.
Range / mean-reversion: worst during session opens; best during mid-session lulls, but only if volatility is low and boundaries are clear.
Breakout strategies: require confirmation — e.g., breakout during overlap or accompanied by increased volume / volatility. Avoid breakouts in thin Asian hours.
News scalping: high risk; only for experienced traders with defined entry, strict spread/latency controls, and capital to absorb spikes.

Common mistakes (and how to fix them)
Trading outside your chosen time windows — fix: enforce a trading clock.
Overtrading in chop — fix: increase minimum R:R and wait for clear structure.
Ignoring spreads and liquidity — fix: include spread in stop/target math and avoid thin sessions.
Moving stops prematurely — fix: use rules (e.g., only move after +1R).
Trading news impulsively — fix: have a news plan: either avoid or have a predefined volatility playbook.
Emotional trading (e.g. not closing the position when the price hits stop-loss)

Psychological & routine rules
Trade only when rested and focused.
Limit screen time to your pre-set sessions.
Keep a journal: reason for trade, outcome, lessons. Review weekly.
Daily routine: pre-market scan 30–60 minutes before your active session, post-session journal entry.

FAQ
Q: Can I trade during Asian hours?
A: Yes — but selectively. Prefer JPY pairs, Asia-centric instruments, or strategies built for low volatility.

Q: What if my timeframe and session disagree?
A: Give priority to higher timeframe structure. If H4 / Daily shows trend, trade during active sessions for better fills.

Q: How much should I risk per trade?
A: Conservative traders use 0.5%–1% per trade. More aggressive ones use up to 2%. The key is consistency and drawdown planning.

Focus your trading during high-liquidity windows (London, New York, and their overlap), avoid low-volume and pre-news periods, always validate trades with liquidity + volatility + clear market structure, use strict risk management (e.g., 1% per trade with position sizing), and follow a pre-trade checklist to avoid low-quality setups. Better timing = better edge.

Enjoy!

[Rimon Khan]

Knowing when NOT to trade is just as important as trading itself.

[Nahid Hossen]

Patience saves accounts—avoid low-quality setups.