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The Best Trading Hours in the Forex Market

what is the best time to trade forex

This affords traders the benefit of not having to watch markets continuously while they’re trading. Once an opportunity is identified, traders place the trade with a stop attached and monitor at a later stage to see the progress of the trade. Knowing the forex market’s operating hours is essential for a trader. You need to know when the forex market opens and closes as well as the four main trading sessions.

  1. However, many traders do not prefer summer for trading as the market generally gets stable and there is less volatility.
  2. The spread on currency pairs involving GBP is lowest during this time.
  3. Swing trading is a happy medium between a long-term trading time frame and a short-term, scalping approach.
  4. However, when the New York Stock Exchange, is active, pairs that involve the US dollar and Canadian dollar are actively traded.

The truth is you can trade on any currency pair at any time you want (on weekdays) but there will be consequences while trading at odd hours. Grasping the timing concept can become challenging for new forex traders, and they should consider variable regional trading session timings. The best trading time would depend on the region wherein the trader is located. These two trading centers account for more than 50% of all forex trades. To 6 p.m., trading mostly happens on the Singapore and Sydney exchanges, where there is far less volume than during the London/New York window.

Best Forex Trading Sessions

This combination of experience and frequency opens the door for losses that might have been prevented had the trader opted for a slightly longer approach like swing trading. For this approach, the daily chart is often used for determining trends or general market direction and the four-hour chart is used for entering trades and placing positions (see below). Traders usually trade swings back in the direction of the preceding trend – in this example the preceding trend is upwards. Another advantage of this approach is that the trader is still looking at charts often enough to seize opportunities as they exist.

CPI DataThe consumer Price Index or CPI is a measure of the average change in the prices paid by consumers in an economy. The news release with CPI data can have a major impact on the prices of currency pairs. The best time to trade forex pair depends on the currency pair you are dealing with. The aim should be to trade forex when the markets are most active as it lowers the spread. When more than one market is open at the same time, this increases trading volume and adds volatility which is the degree to which equity or currency prices change.

what is the best time to trade forex

However, if you are a longer-term trader (swing or position trader), you may find more profitable opportunities to trade outside of these times. This article discusses the most suitable times to trade currency pairs, taking into consideration aspects such as volatility, market volume and news releases. Certain trading strategies are best suited to specific times of the day. The best time to trade forex depends on the currency that you are trading.

What time should I wake up to trade forex?

So, traders will experience higher volatility for EUR/ZAR and USD/ZAR currency pairs during the London session. Moreover, the best trading sessions for a trader in Japan, Australia, and New Zealand are when the Japanese and Australian markets are active. The most active times in the forex market are during the overlap of the major trading sessions, and if you are a short-term trader, you will want to trade during these times.

Forex traders often commit their hours to memory, paying particular attention to the hours when two exchanges overlap. Even though dozens of economic releases happen each weekday in all time zones and affect all currencies, a trader does not need to be aware of all of them. It is important to prioritize news releases between those that need to be watched versus those that should be monitored.

The source also suggests that the New York and London exchanges account for more than 50% of all forex exchanges. Moreover, the Singapore & Sydney exchanges have comparatively lower trade volumes than New York & London exchanges due to the timings. Also, the assumption is based on the fact that no significant news broke during trading hours and can account as an exception. Within the global market, the four major forex exchange markets are in London, New York, Sydney, and Tokyo.

Using multiple time frame analysis

Banks and other financial institutions use this daily rate to set their currency exchange rates, which in turn determine the prices used in corporate foreign exchange transactions. The highest trading volume occurs during the overlap of the London and New York trading sessions. More than 50% of trading volume occurs at these two financial centers. Most beginners in the forex market often wonder why can’t they trade anytime they want forex market remains active 24 hours a day.

On the other hand, in an illiquid market the spread between the bid and ask may be very wide and not very deep. I general, liquid currency pairs are those that are active and have high trading volume. While the forex market is open 24 hours a day, 5 days a week, it doesn’t mean all trading hours are created equal. As a result, certain times or periods of the day offer more activity and volatility compared to others, leading to potentially more trading opportunities. Use the Forex Market Time Zone Converter tool below to view the open and close times of the main forex trading sessions in your own local time zone.

A key point to remember, especially for new traders, is avoiding trading during low-liquidity markets. Besides this, traders should also rely on the volatility and liquidity of the forex pair. With higher activity, trading spreads, or the differences between bid prices and ask prices, tend to narrow. At these times, less money goes to the market makers facilitating currency trades, which means traders can pocket more. EST, as this is the time when both markets on each side of the Atlantic are open. As a result, the market experiences a lot of trading activity and liquidity, making it a good time to trade for those who want to take advantage of the volatility and volume.

When is the best time to trade forex?

In addition, sticking to a trading schedule means you are less likely to overtrade or make impulsive decisions. As a result, it will help you to protect your capital and hopefully improve your long-term trading results. The position trading time frame varies for different trading strategies as summarized in the table above. This could fluctuate from daily to yearly under the ‘long-term’ definition.

Many traders look to utilize price action (as seen in the weekly chart below) for determining trends and/or entering positions, but indicators can absolutely be utilized here as well. The more traders…trading, the higher the trading volume, and the more active the market. And this is why you should focus your energy during specific trading sessions.

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