Forex is known as the world’s largest financial market. It is open 24/5 in different parts of the world, and this allows to trade at any time of the day or night. It might seem to be not that important to know what time is considered to be the right one for conducting trading operations, but the reality is different – time is what plays a crucial role in defining the profitability of your moves.
Active market hours bring great trading opportunities to boost profits. Why are these hours so powerful? High trading volume and volatility reach the maximum level during these hours – millions of active participants start trading worldwide following the latest economic news. Banks, corporations, investment managers, hedge funds, central banks, individual traders, and brokers are the main participants of the currency markets around the world.
When to trade forex? The market is open from 5 p.m. EST on Sunday until 4 p.m. EST on Friday. It means that there is at least one market ready for your trading activities at any time. You should be aware of a few hours of overlap – the market of one region is closing, and another one is opening.
So, each of the four major forex exchanges has its special hours, and they are the following:
- London: 3 a.m. to 12 p.m. EST
- New York: 8 a.m. to 5 p.m. EST
- Sydney: 5 p.m. to 2 a.m. EST
- Tokyo: 7 p.m. to 4 a.m. EST
High trading volume and volatility reach the maximum level during active hours – millions of market participants start trading worldwide following the latest economic news.
Best Time of Day to Trade Forex
These FX exchanges operate independently, but the list of traded currencies is always the same. During the opening hours of two exchanges, traders are actively buying and selling. Thus markets experience an increased trading volume. Increased volatility and reduced market spreads are observed when bid and ask prices of one forex market directly impact bid and ask prices of the other opened exchange market. Thus, it’s crucial to know when there is such an opportunity to trade when two exchanges are available for the implementation of your strategy:
New York and London exchanges are open from 8 a.m. to 12 p.m.
It shouldn’t even be mentioned how high the volatility of the market is during these hours. Why? Well, the US dollar and the euro greatly impact the entire world’s economics.
Sydney and Tokyo exchanges are open from 2 a.m. to 4 a.m.
This period of time can’t be considered as volatile and highly liquid as the above-mentioned one, but there is a good chance to catch that desired hours of high fluctuations in pips. The EUR/JPY currency pair is a good choice for trading because of being highly demanded.
London and Tokyo exchanges are open from 3 a.m. to 4 a.m.
The situation is the following here: one-hour overlap doesn’t provide wide opportunities to observe impressive pip changes. Also, most traders from the US won’t be active during this period of time.
For example, if a trader chooses a less active period of time between 5 p.m. – 7 p.m. EST (New York closes and Tokyo opens), there is Sydney that will be open for trading, but the activity there is far too different and low as compared with other three major sessions. Low activity equals low trading profitability. If you consider a plan to trade such currency pairs like EUR/USD or USD/CHF, it’s better to focus on the 8 a.m. – 12 p.m. window when the European and American markets are active.
The thing you should be aware of is that high trading activity means high volatility. Some traders think of volatility as a profitable opportunity, while others would rather avoid that. A risk management strategy is a structured approach to understanding and managing risky situations.
Things to Consider
- Economic data or any related news is what greatly influences the trend movements in forex. Your trading day should always start with the market analysis.
- Since the US dollar plays a big role in the global economy, the economic releases of that country are particularly important and impactful.
- A trading schedule that is adjusted according to the market volatility plays a crucial part in loss management.
- Expected trading volume is usually based on conditional assumptions without any important news coming to light.
- Yes, forex is a 24-hour market, but there are certain currencies that aren’t traded 24 hours a day. US dollar, the euro, the Japanese yen, the Australian dollar, the British pound, the Canadian dollar, and the New Zealand dollar are all traded 24/5 since they are considered major currencies (majors).
- New forex traders should open accounts with brokers that offer an option of using demo platforms for practice.
A risk management strategy is a structured approach to understanding and managing risky situations.
With forex, it’s possible to trade all day and night, but choosing the right forex trading hours defines how profitable your deals will be. Market overlaps are there for you to reveal the real possibilities of the world’s exchanges.
Volatility is your friend if you know how to "be on friendly terms" with it – define trading hours, focus on your strategy, prioritize rational thinking and read the news to be on top of things.
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