Although the Forex market is open 24 hours a day, there are a few hours that are considered the best times to trade Forex. It is extremely important for a trader to identify these times so as to increase profit potentials.
This article will not only cover the topic of Forex active hours, but also reveal the overall trader mindset towards market hours on the whole.
Video: The Best Time to Trade the Forex Market
To understand whether there is a best time to trade currencies pairs, first you need to know the “actual’ operating hours of the different market sessions – Sydney, Tokyo, London & New York.
Below are the operating hours in Greenwich Mean Time (GMT).
- Sydney- Open 21:00; Close 06:00
- Tokyo- Open 23:00; Close 08:00
- London- Open 07:00; Close 16:00
- New York- Open 12:00; Close 21:00
From the above grid, you will notice that there are three times when trading time zones overlap. Meaning two markets are traded concurrently.
- 23:00 – 06:00 GMT – Sydney and Tokyo Overlap.
- 07:00 – 08:00 GMT – Tokyo and London Overlap.
- 16:00 – 21:00 GMT – London and New York Overlap.
In Forex trading, when two markets are open concurrently, there is usually more volume and volatility.
When is the Best Time to Trade the Market
There are three main trading time zones. The London session opens from 3:00 am to 11 am, the New York session which is open between 7:00 am to 4 pm and the Japan/Australia session which is open from 7:00 pm to 3 am.
As you can see, the forex market is active all through the day. However, price movements and trading volume are not uniform through all these sessions. At times, it is best for traders to leap into the market and at other times, it is best to just stay away from it.
The central idea here is to get involved in the trade when the markets are extremely busy. Remember, all of the currencies react in different ways during every session. For instance, during the New York market, the British Pound, US Dollar, Australian Dollar, Euro, Canadian Dollar, Japanese Yen and New Zealand dollar are extremely active and when the London market is open, the Swiss Franc, Euro, British Pound and US Dollar are the most active currencies.
Many traders agree that the best time to trade currency pairs is in the first 3 to 5 hours of all the sessions, particularly when your fundamental analysis points on the new economic calendar are released. Therefore, it is best for you to trade in between 3 am and 11 am.
The reason is that the New York and London market overlap during these active trading hours, which creates loads of trading opportunities that are boosted with regular price movements. If you have a proper trading plan in place, together with a money management system, it is not hard to see profit potential up to hundreds and thousands of dollars in just a few minutes depending on your lot size.
The pairs of currencies that happen to be the most active during the overlap are GBP/USD, USD/CHF, USD/JPY and finally EUR/USD. The three hours in between 8 am and 11 am are particularly profitable as a number of economic releases are made between them, which can help you make substantial profits.
Statistically speaking, the best times to trade Forex is on the hours mentioned above. The best days to trade are on Tuesdays and Wednesdays as the peak trades take place during these two days.
The Worst Time to Trade the Forex Market
Many traders do not trade on Sundays, as nothing significant really happens in currency rates. They also avoid trading late on Fridays, as the market is extremely unpredictable due to the weekend. Holidays are avoided too.
Looking Beyond Trading Times
Knowing the active hours is only the beginning of the story. What is more important is that every trader has to understand their trading style. You need to ask yourself these questions. Are you a long term trader? Are you a swing trader? Are you a intraday trader?
If you don’t even know what type of trader you are, it will not be easy for you to be successful in this business.
What Time Period Should Long Term Traders Use
In the forex, unlike equity trading, there are very few long term investors. Long term traders don’t bother much about market hours, as their open trading orders normally attempt to bypass all the short-term volatility of the market.
What Time Range Should Swing Traders Use
Swing traders who hold their position for one or more weeks are also not too concerned about market hours. Their main concern will be for entry or exiting of trades when more than one market is open to take advantage of more volatility.
What Time Range Should Intraday Traders Use
Of all the trading styles, intraday traders are the ones most concerned about Forex active hours. For Intraday traders, they will most likely prefer to be around when more than one market is open. London session provides the most liquidity and volatility. London operating hours also overlaps two other markets, namely the Tokyo market and New York market.
It is also important to trade the currency pairs that are related to the particular markets open. For example, when Sydney and Tokyo markets are open, currency pair such as AUD/JPY will have increased volatility compared to New York market opens. Likewise, when the London market is open all the currency pairs such as EUR/GBP and EUR/CHF will tend to move more than in Sydney session.
The Forex market is truly a connected global market. That is to say, when a particular currency pair makes a big move, don’t even think that other ones will not! Hopefully, the above information helps you decide what trading time is best for you. However, there is a saying that big and successful Forex traders never sleep, as the market is always open for business!