Best and Worst Times to Trade Forex

Understanding Forex Market Hours

Forex trading spans 24 hours a day, five days a week across time zones of different global markets. Knowing these hours is extremely important when it comes to deciding on when you should trade. Below is a summary of the key market hours and their traits.

What Are the Forex Market Hours of Operation?

The most important thing is that the currency market never closes, as one trading session ends in one part of the world another is just opening. The main market hours for trading are spilt into four main sessions.

New York

New York trading session 8:00 AM – 5:00 PM EST. This session becomes the most important as it is overlaps with London which brings extreme liquidity and considerable trading volume. With big financial institutions and banks being live, this becomes an important time to trade the USD pairs. As two overlapping markets guarantees active trading, more price action and thus the opportunity for successful trades.

Tokyo

Tokyo trading session 7:00 PM – 4:00 AM EST. This session features lesser volatility as compared to the UK and US sessions. This is crucial time for JPY pairs, and trends may form during this session which can continue into the following sessions. Daily Price Action points out that trading during this session has some advantages as the directional moves of JPY pairs are clearer.

Sydney

Sydney session opens at 5:00 PM EST and goes through until 2:00 AM. This is the shortest trading session, but also represents the start of a 24 hour day. The Sydney session will headline a much quieter one but ultimately sets the tone for Asia. Fewer market movements are beneficial to low volatility trading and for any traders who seek lower ranges or predictable price fluctuations.

London

The London session happens to be open from 3:00 AM until noon EST. It is one of the most active trading time periods and comprises a substantial portion of daily trade volume. It normally provides a high volatility period due to its overlap with New York session, and hence an opportune trading window. This session can be divided into three country sessions including London (as it is one of the largest financial centers), and those that are usually included in this time zone, such as Zurich, Brüssel, Paris or Luxembourg. Therefore, we have many trading opportunities on major currency pairs like EUR / USD and GBP / USD.

The Best Times to Trade Forex

Choosing the best times to trade Forex can better your odds of success; In general, we trade the most active part of the day for a particular market because that is when liquidity tends to be highest. The trading signals we offer on our website will typically start from the end of the Asian session into the London session and New York open.

The UK and US Market Overlap: 8:00 AM to 11:00 AM

This is the most volatile and liquid period when to trade Forex. It is, the middle of the London session and opening of the New York session. This is a great time period for traders, as price movements happen quickly and there are plenty of trading opportunities. This overlap is considered the key to getting high quality set ups from Forex trading.

The Asian and UK Market Overlap: 12:00 Midnight to 3:00 AM

This is the time when Asian markets are closing and the UK Market is opening. It is not as fast paced as the UK/US overlap, but still provides substantial trading opportunities especially to JPY and EUR pairs. This time of day can benefit traders who trade currency pairs such as EUR/JPY and AUD/JPY.

The Aus and Asian Market Overlap: 9:00 PM to 12:00 Midnight

This overlap signals the end of Sydney trading and the transition into Tokyo trading. The AUD and JPY pairs that trade here would have moderate volatility and liquidity, hence is good for trading opportunities.

The Worst Times to Trade Forex

Avoiding the worst times to trade the Forex market can help your profits to increase and reduce unnecessary losses.

Immediately Before or After High-Impact News

Trading during big news announcements is incredibly difficult to do with any real consistency. You should generally avoid trading just before or after U.S. high-impact economic announcements as economic news can create extreme volatility and unpredictable trading conditions. The sudden spikes can cause you to hit your stop loss before going in the intended direction.

The First and Last Day of the Trading Week

The start and ending of the trading week are unstable. Markets tend to be even less liquid on Mondays, when markets are just resuming trading after the weekend or Fridays -which traders try and close their positions ahead of weekend.

When You Aren’t in the Right Mental State

Trading demands a razor-sharp mind and clear head. Do not trade when you are stressed, tired or emotionally upset. A bad mental state can cause you to make impulsive decisions and increase your losses. Audacity Capital believes that trading is all about being clear in the mind and emotional stability goes a long way when it comes to successful trading.

The First Hour of the Day

The first hour of any trading session can often be frenetic, with markets adjusting to news and events that happened outside the regular trading hours. Additionally, waiting for the market to settle can often put you in a more favourable position for your trades, rather than simply being too impatient and eager putting your trades at risk.

Market Opening and Closing Times

Market openings and closings are often times when you can witness increased volatility as orders flow in alongside knee jerk reactions to overnight international news. Stay away during these times until you have a solid trading strategy and rules on how to deal with volatile markets.

Economic Releases and Their Impact on Trading Times

Forex pairs are very sensitive to economic new releases which can cause significant price moves. Understanding how and when these releases affect the market can help you to organize your trades better. Also make sure sure to check different forex brokers as the spreads can be different on all during high impact news releases.

Major Holidays and Bank Holidays

These are also less predictable times, as we know that during a major holiday or the bank holidays liquidity is much lower. Low liquidity and weakened trading can make movements during these hours very volatile and unpredictable due to thin market conditions.

Economic News Releases

GDP reports, employment data and central bank minutes are examples of economic news releases that can increase levels of market volatility. The economic calendar over at forex factory will prepare you accordingly and keep you from losing money without knowing what events could impact your trades.

Forex Trading Strategies

Great trading strategies are critical to success in the Forex market. Here’s one strategy to keep in mind during the London session.

Trading the London Session: A Strategy

This is due to the high liquidity and volatility of the London session which gives us a lot trading possibilities. First of all, you could consider trading the major currency pairs i.e. EUR/USD and GBP/USD. Establish breakout trades during early hours and bank on the vigorous market movements.

The Importance of Overlaps in Forex Trading Times

Trading during session overlaps can maximize your chances of success. These times offer more liquidity and volatility -giving the possibility of bigger wins. The preferred trading hours are during the over-lapping times between Europe and North America.

Liquidity and Volatility in Forex Markets

When it comes to trading Forex, liquidity and volatility are two important criteria. Knowing what role they play, will assist you in executing better trades.

Why Is Forex Liquidity Important?

Liquidity, in simple terms means how easily you can buy/sell an asset without affecting its price. The high liquidity in the Forex market contributes to reduced spreads = lower trading costs. It also means large orders can be executed smoothly. This is good for traders because it equals less slippage and better price execution on many instruments.

Which Are the Most Liquid Currencies?

Currencies that come from strong economies are considered very liquid currencies, ones such as the US Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP) and Swiss Franc (CHF). They have high trading volumes and tight spreads which is perfect for trading.

The Best Days and Months to Trade Forex

Timing your trades to the best days and months can increase returns. In order to capitalize on these conditions, check out ideal days and months below.

Best Trading Days for Forex

Tuesday to Thursday

Weekdays, such as Tuesday through Thursday generally have higher volume and are more stable. These days often provide the greatest opportunities for profitable trades.

Day after an Important Economic Announcement

The second day after a big economic announcement often makes for great trade opportunities as the market absorbs news and trends show up.

Best Months and Worst Months to Trade Forex

There are seasonal trends and trading activity that make some months of the year more favorable to trade than others. You need to recognize these cycles in order to utilize the best trading method.

The Bottom Line

You need to consider when the appropriate time is for you to trade and have a strict trading plan with an effective strategy for your preferred trading hours. That’s how to be successful long term in the Forex markets.