Chapter 9 Best Time Of Day To Trade

The debate on which ones are truly the best month to trade forex rages on among traders. There are many different theories on when it is best to trade forex in general, as well as theories regarding when it is best to trade specific currency pairs in general. In this article, we will go over why time matters in forex, and then we will highlight the best time and best months to trade forex and more. The overlap between the Sydney and Tokyo markets trading offers a two-hour period of increased price fluctuation as there are more traders in the market. The one-hour overlap between the Tokyo and London markets can also see changes in price action, although there is less time for large fluctuations. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

64% of retail investor accounts lose money when trading CFDs with this provider. There will be times when a forex pair throws up strange price action, without any notable rhyme or reason. Random moves may give the market an exciting feel, but what they generally make for is rocky trading terrain.

Two markets opening at once can easily see movement north of 70 pips, particularly when big news is released. Tokyo, Japan (open 7 p.m. to 4 a.m.) is the first Asian trading center to open, takes in the largest bulk of Asian trading, just ahead of Hong Kong and Singapore. The currency pairs that typically have a fair amount of action are USD/JPY (or U.S. dollar vs. Japanese yen), GBP/USD (British pound vs. U.S. Dollar), and GBP/JPY (British pound vs. Japanese yen). The USD/JPY is an especially good pair to watch when the Tokyo market is the only one open, because of the heavy influence the Bank of Japan (Japan’s central bank) has over the market.

However, this pair is unique in the fact that it has two separate volatility surges during the day. First, we have the session overlap between New York and London that lasts from 1 p.m UTC to 5 trading with plus500 p.m UTC. However, the popularity of the Euro, coupled with the fact that some traders use delayed indicators, makes a separate volatility peak appear at around 8 p.m that lasts until 10 p.m.

Impact of News Releases on Forex Markets

The high liquidity also means that most currency pairs are traded with relatively thin spreads. The euro and pound sterling pairs are the best currencies to trade during the London session. The New York session opens at 1300hrs GMT, while the London session is still running.

Pairs such as the NZD/JPY require a smaller margin than a pair such as the GBP/USD. The most volatile days of the week to trade is Tuesday, Wednesday, and Thursday for most currency pairs. National holidays are unavoidable, but the free time you have on these days isn’t something that you should translate into trading activity. Banks are one of the biggest influencers on the forex market, so their closure on holidays is a telling sign.

This specific pair of currencies has shown strength throughout the day as their respective sessions don’t actually overlap, and their reliability instead comes from political and economic reasons. Still, hours between 7 p.m and 4;30 a.m have historically shown higher volatility for this pair. While you can access the forex what is stock etf market at any time you wish, there is little doubt that certain timeframes simply work better to your advantage. Forex is dominated by prominent currencies that are represented by countries. So, for example, if you want to trade the Japanese Yen, it is advised to trade in the hours that Japanese traders are more active.

Forex market hours are derived from different geographical trading sessions, meaning you can trade around the clock, five days a week. We explain the different forex market opening times, and the best times to trade in the US. It is important to take advantage of market overlaps and keep a close eye on news releases when setting up a trading schedule. Traders looking to enhance profits should aim to trade during more volatile periods while monitoring the release of new economic data. This section does not include timing preferences for specific currency trading pairs. Instead, it focuses on giving you an overall understanding of exactly when it is best for you to trade in general.

How do trading hours and time zones affect individual forex pairs?

Pairs such as USD/JPY or EUR/JPY are popular during the Tokyo session. For day traders and scalpers, the best time of day to trade Forex is the London-New York overlap, which ensures the tightest spreads andlargest price swings. Additionally, major Forex news is reported at the beginning of the New York session which can have a large impact on the rest of the trading day.

There are numerous financial centers in which currencies trade, but the four key money centers mentioned earlier are by far the largest and most important. The forex market consists of a decentralized network of financial institutions and other market participants. Although the overall currency market trades around the clock, the trading hours of a particular firm’s office is generally determined by its local business hours.

Popular Forex Currency Pairs to Trade

Like many other investments, you can earn significant profits, but you could also suffer losses. While each exchange functions independently, they all trade the same currencies. I look to bring back elegance and decency to the art of producing audience-friendly content, one article at a time. Give yourself a better chance at the Forex market by hosting your trading platform right next to your broker. Capital Com Online Investments Ltd is a limited liability company with company number B.

The forex market runs on the normal business hours of four different parts of the world and their respective time zones. There can be exceptions, and the expected trading volume is based on the assumption that no major news will come to light. Political or military crises that develop during otherwise slow trading hours could potentially spike volatility and trading volume. While some investors fear market volatility because of the increased risk, forex traders generally prefer greater volatility because they have the potential to earn higher profits. Getting the timing right is only one of the many facets of the market that a trader needs to master in order to be successful. With the growing popularity of the forex market among retail traders, maintaining a technological edge with your used hardware has also become a factor in your success.

Best Days of the Week to Trade Forex

This again makes it a flexible pair that you can trade at any hour with relative safety. But if you’re looking to maximize your profit potential, the three-hour window between 12 p.m and 3 p.m. Has historically provided the highest level of volatility for this specific pair. With that said, the second half of Monday in the UTC timezone is when the initial surge in volatility and market overlap really begins.

There are countries such as the US, UK, and Australia that observe Daylight Savings Time . This will also influence the open and closing times of the respective trading sessions. While AvaTrade notifies traders of changes in different open/closing times, it is important to note that due to DST, there will be changes in market hours in March, April, October, and November. EUR/USD. By volume, this is the most popular forex pairing, and the currencies involved represent the two largest economies in the world.

The larger percentage of investors avoid making trades as the new week dawns, so it’s fair to say that you should do the same. Unless you use a fixed spread broker spreads – the difference between the bid and ask prices – constantly change during the day. Avoid opening positions outside the main trading sessions, as liquidity in the market may still be low and spreads high. Swing and position traders are less affected by the time of day they place their trades, since their overall profit-target and trading horizon is much larger compared to that of scalpers and day traders. Forex market hours refers to the specified period of time when participants are able to transact in the foreign exchange market. Night trading is favored by strategies that work better with less volatility, such as scalping or automated trading programs.

Is it good to trade forex at night?

However, stable economic growth and attractive yields or interest rates are inexorably intertwined. A big news release has the power to enhance a normally slow trading period. When a major announcement is made regarding economic data—especially when it goes against the everfx predicted forecast—currency can lose or gain value within a matter of seconds. To start trading forex, you’ll need to make an initial deposit with a brokerage. Many brokerages don’t have a minimum amount for trading forex, but you typically need between $50 and $500.

In general, the more economic growth a country produces, the more positive the economy is seen by international investors. Investment capital tends to flow to the countries that are believed to have good growth prospects and subsequently, good investment opportunities, which leads the country’s exchange strengthening. Forex trends often originate in London as well, which is a great thing for technical traders to keep in mind. Technical trading involves analysis to identify opportunities using statistical trends, momentum, and price movement.

While the AUD is tied to the Chinese economy, the yen is strongly influenced by the US economy as a major global technology manufacturer and service provider. Traders can then look to trade within either the volatile or quiet periods, with both approaches having their own merits and disadvantages. Typically, a forex pair has greater liquidity when at least one of its markets is open – USD/JPY will be busiest during the Asian or US sessions, but less so during the European session. EUR/JPY is more active at the open of the European session, and EUR/USD will not be quite as busy during the Asian session, and so on.

What to bear in mind before trading during different forex market hours

So, when markets overlap and volatility increases, so too does the ability to trade in a more liquid and hopefully profitable market. The foreign exchange market, or forex, is a global decentralized market. Optimal times to trade the forex market are when the market is most active, which is often when the trading hours of major regions overlap. Not only can you use the previously mentioned overlap between New York and London that lasts from 1 p.m UTC to 5 p.m UTC, but another rather long window of opportunity also appears from 6 a.m to 4 p.m. This ten-hour volatility window is the largest of its kind in the top four proven trading currency pairs that we have covered. For this reason, the GBP/USD pair is almost universally known as one of the most profitable currency trading pairs in the forex market.

• No representation or warranty is given as to the accuracy or completeness of the above information.
• Suppose we are going to be spot on with our estimation that Tuesday and Thursday showcase the most volatility during the week.
• While we did briefly mention Monday earlier, many beginner traders see Monday as a breakaway point during the week since it marks the end of the weekend.
• They tend to be less active and thus less volatile at night, particularly if they do not involve an Asian currency.
• While you can access the forex market at any time you wish, there is little doubt that certain timeframes simply work better to your advantage.
• If liquidity is what you’re after, look to keep the bulk of your trading locked to the middle of the week, as it’s when trading activity is at its height.

Some of the reason could be because that on Monday, traders are still hanging over from the weekend, so they are not too active. In other words, traders get unnerved by bad results, and they go rogue—abandoning proven trading strategies in hopes of earning back what they’ve lost. Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. The most popular way to trade forex is through derivatives, including a rolling spot forex contract offered by IG.

We might range trade these currency pairs during the 2 PM to 6AM time window. We know that the Euro tends to move less through certain hours—let’s use that to our advantage and make a rule to trade only during low-volatility times. Instead, currencies are bought and sold in major financial centres around the world, called Forex trading sessions. To determine the best time of day to place trades on the Forex market, you need to be aware of how the market operates.

On top of that, timing also plays a key role, arguably a more important role than most people probably realize, allowing you to truly pick your moments. Thanks to the above information you now have a firm grasp on when you should and shouldn’t be trading forex. Asia-Pacific currencies can be difficult to range trade at any time of day, due to the fact that they tend to have less distinct periods of high and low volatility. We find that the time filters have historically worked well for European currency pairs such as the Euro/US Dollar and the US Dollar/Swiss Franc.