The Forex market is a worldwide, pleasurable 24 hour per day, five day each week trading market. It might be easy to believe that trading is just as profitable at any hour of the day, but you would actually be wrong; there are higher opportunities for profit in periods of higher liquidity or volatility. In this article, we will tell you about the best trading times, why forex trading sessions matter, and how time zones change the game.
FOREX Market Structure: Continuous Trading Hours
Due to its global nature, the forex market is able to continue indefinitely. The game starts with the Asian session, moves on to the European session, and ends with the North American session. When one market closes, another opens, leading to periods of overlap, where increases in activity & liquidity occur. The overlaps are generally considered the best times to trade.
Here are the four major forex trading sessions with their approximate times (in GMT):
10:00 PM to 7:00 AM Sydney Session
Tokyo Session: 00:00-09:00
London: 08:00 AM — 05:00 PM
NYC Session: 1 PM – 10 PM
As these are Universal Time, it is very important to convert to your local time zone and to find out when trading opportunities line up with your schedule.
Best Times to Trade Forex
There are periods during the day that are more relevant for forex traders because they bring higher trading activity, liquidity, and price movements. These are usually at certain overlapping markets or important news releases.
Market Overlaps
A market overlap describes a time when two trading sessions are open simultaneously, resulting in high liquidity and volatility. For trading, these are the golden hours:
London-New York Overlap (1:00 PM – 5:00 PM GMT): This is the time when the forex market is most active. It experiences the heaviest trading because both European and North American markets are open. This time of the day sees an extensive amount of price movement in major currency pairs like EUR/USD, GBP/USD, and USD/JPY.
Tokyo-London Overlap (7:00 AM – 8:00 AM GMT): This overlap is not as long, but there can still be some nice trading opportunities, especially for currency pairs containing the Japanese yen.
High Volatility Times
That time is not too far ahead; another, volatility spikes at the beginnings of a new session (e.g., When the London session opens at 8:00 AM GMT) and during major economic announcements. Releases like interest rate decisions, non-farm payrolls or GDP updates can cause high volatility that creates great opportunities for the trader.
Quiet Times to Avoid
Except for JPY related pairs, the market is not very volatile during the Asian session between 10:00 PM and 12:00 AM GMT. Likewise, the end of the New York session trading (after 10:00 PM GMT) is also characterized by limited opportunities due to a lack of liquidity.
Forex Time Zones — and Your Trading Plan
With forex being traded in various time zones, confusion can arise on when to place trades. The key is to sync well with when your currency pairs are moving the heaviest and liveliest to your trading strategy.
Impact of Time Zone on Trading:
Activity Specific to Currency Crosses: The highest volatility for a currency is determined by the trading session of its home country. For instance:
Most active during NY session for the USD pairs.
The London session has the highest activity for EUR and GBP pairs.
The most active pairs for JPY are during the Tokyo session!
Local Session – This is used to change what time local time the trading sessions occur so that you know when to trade the active hours. If you’re in EST (Eastern Standard Time), the London session starts at 3:00 AM and the New York session opens at 8:00 AM, for example.
Essential Midday Tools for Timezone Management:
Because of the most entry time to the Forex market, many tools provide to easily convert the GMT hours of these commodities into your local time zone using online tools – the pips, GMT to your local time zone, and so on.
Economic Calendar: A Forex economic calendar that shows the most significant events with the local time at which they occur That way, you know when the market is likely to gain or lose its balance.
Key Times When the Forex Market is Good for Different Strategies
Some trading styles do well in particular market and economic environments. Now, timing can affect some of the common strategies as follows:
Scalping: Scalpers enjoy the most liquid and volatile times of day, such as the London-New York overlap.
Swing Traders: Swing trading is best done after the beginning of the London or New York sessions, when it becomes apparent which way the price direction is headed.
News Trading – This strategy is based on trading approaches during major economic announcements, which typically take place in the London and or New York trades.
Timing is Everything in Forex
When the best times to trade forex are will depend on your trading strategy, which currency pairs you are looking at, and your time zone. The London-New York overlap is considered to be the best time to trade as there is the most liquidity and volatility. Of course, knowing your own trading style and tailoring it with the activity of the session allows you to heavily capitalize on your reaction to trade while maintaining time efficiency. Structure your trading plan on the busiest hours of your chosen currency pairs.