The Best Trading Hours in the Forex Market

If there is a major economic announcement coming out of the US the following day that the trader expects to have a long-term impact on a currency pair, they can gain a first-mover advantage by trading on Asian markets the night before. There are several factors that affect exchange rates between the currencies, including economic indicators, central bank policies, geopolitical events, and market sentiment. Familiarizing yourself with those factors can help you better understand the price trends, but some traders will choose to simply focus on chart reading to make informed trading decisions.

This time period tends to have the most liquidity for the Australian and New Zealand Dollars and their crosses. This means that you can start trading Sunday afternoon EST and continue trading non stop all the way until Friday afternoon EST. This round the clock trading feature gives traders with workaholic tendencies a perfect market place in which to operate. Lastly, some European traders may be closing their positions as their day ends, which could lead to some choppy moves right before lunchtime in the U.S.

Understanding Forex Market Hours

Interestingly, forex trends tend to originate in London, which is important for technical traders to bear in mind. Technical traders utilize analysis tools to identify opportunities using statistical trends, price movement, and momentum. Offer technical traders the tools needed to identify these opportunities and create an effective strategy – some better than others. First time forex traders often get caught up in the thrill of trading 24 hours a day five days a week—after all, logically, the more time you have to trade, the more opportunity there is to experience success. And with COVID-19 re-energizing the Forex market, and key data points signalling the strengthening of the U.S. dollar (as well as other safe-haven currencies) in the long run, there is more reason than ever to be excited. Forex markets are “open 24/7” in a sense because different exchanges around the world trade in exactly the same currency pairs.

This time period can see particularly active trading in the USD/JPY, EUR/JPY, GBP/JPY and CHF/JPY currency pairs. Now that the trade direction has been identified, the swing trader will then diminish the time frame to four-hours to look for entry points. In the example below, there is a clear price resistance level that the swing trader will look at when entering a long trade. Once price breaks https://forexarticles.net/lessons-in-corporate-finance-a-case-studies-approach-to-financial-tools-financial-policies-and-valuation/ or the candle closes above the designated resistance level, traders can look to enter. 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.

The Best and Worst Performing Currency Pairs in May 2023

The Asian trading session actively trades Asian currencies, such as the Japanese yen, Australian dollar, and New Zealand dollar. However, bear in mind that the New York and London sessions actively trade all major currencies, not only the US dollar and European currencies. In essence, currencies such as the Australian dollar and New Zealand dollar are less traded than other majors, such as the US dollar, euro, and British pound. The Sydney session, for example, could increase the liquidity for AUD pairs compared to other sessions.

• This means the trader can control trade sizes larger than the amount of capital in their account.
• Therefore, picking the correct direction of that trend is essential to winning trades.
• This means that you can start trading Sunday afternoon EST and continue trading non stop all the way until Friday afternoon EST.
• Thereafter, select a technical analysis chart that you are comfortable with, conduct thorough analysis, and ensure to implement sound risk management on all trades.
• The scalper or day trader is in the unenviable position of needing the price to move quickly in the direction of the trade.

If you are a day trader, it makes sense to aim to trade during the most volatile periods. To choose the best time frame, consider what your trading style is and what trading strategy you wish to follow. Thereafter, select a technical analysis chart that you are comfortable with, conduct thorough analysis, and ensure to implement sound risk management on all trades. The Forex market is an over-the-counter market which trades during Forex trading sessions, including the New York trading session, the London trading session, the Sydney trading session, and the Tokyo trading session.

Further reading on forex technical analysis

We suggest traders to use our Economic Calendar, always updated with the scheduled news releases, through the trading day (and week). This means the trader can control trade sizes larger than the amount of capital in their account. If the trader aggressively uses the available high leverage (low margin requirements) on their account to open more trades, then the market needs only to move a small amount to trigger large gains or large losses in their account.

Nevertheless, all market participants could benefit from trading during the market’s most active days. The Forex market is open Monday through Friday, and is closed on weekends. While Mondays and Fridays are usually slow, there can be significant movements on these days, especially if important market events happened over the weekend which may cause the market to open with a gap on Monday. It is during this period that the Reuters/WWM benchmark spot foreign exchange rate is determined.

Tips for Trading FX Pairs

This article discusses currency pairs that are commonly traded and tips for smarter trading such as incorporating technical analysis, picking the best currency pair to trade, and implementing sound risk management techniques. Lastly, practice these strategies in a demo account to improve your trading skills. The chart above shows the average volatility in pips for different currency pairs during major trading sessions. As you can see, the London session usually has the highest volatility. The period when these two trading sessions overlap (London afternoon and New York morning) is the busiest period and accounts for the majority of volume traded in the day, with trillions of dollars in value changing hands.

• Those looking to employ longer-term strategies may also consider an early entry by trading at night.
• If this belief is true, we should expect to see evidence that trend reversals and relatively higher volatility have been more likely to happen at the turns of months.
• Switching between different forex trading time frames has a number of advantages.
• Though it is the smallest of the major markets, it accounts for plenty of the action when markets reopen on Sunday afternoon, because traders and financial institutions are beginning to regroup after the weekend break.

A demo account allows you to practice trading with virtual money in a simulated trading environment, without risking real funds. The best way to control this instinct is to plan out the exit of the trade BEFORE entering the position and stick to your plan!. Successful traders will seek out trading opportunities where the potential profit is at least twice the risk of loss creating a 1-to-2 risk-to-reward ratio. By understanding the market conditions and choosing the best pairs to trade, traders can increase their chances of success.

It is nice to have the flexibility to trade at any time, but we are also human, which means that we must sleep, eat or relax, and cannot be monitoring our positions all day and all night. There will always be times of missed opportunities or jumps in price that will move against established positions when we are not around. This is a human limitation, and that is why in Forex it is advisable to choose the best time to trade based on one’s own available time and strategy logic. Utilizing different forex time frames can assist traders to spot the larger trends and more granular price action that may be unfolding. Different viewpoints can be formed when switching between different time frames on the same currency pair and this can either benefit or hinder the analysis.

Of course, this session is ideal for the European trader, and it is also not too bad for the Asian Trader who can trade the European session during his evening (3 pm to Midnight, Hong Kong Time). Currencies like the Euro, British Pound and Swiss Franc are most active during this session as traders from the European countries use their domestic currency in their foreign exchange transactions. The London-New York overlap, which is the time of day when the two largest Forex trading sessions are both open, traders get the largest price swings and lowest spreads to trade the market. Besides the US dollar which is heavily traded during all sessions, Asian currencies have the largest turnover when the Asian markets are open. This means larger price fluctuations and lower spreads on trades that involve Asian currencies, which is a major advantage for day traders and scalpers.

Live Forex Sessions by Time Zone

The hours from 8am to Noon have been the second most active, representing the first few hours of the London business day. The hours at the end of the day around the New York close, before Tokyo opens, have shown the lowest average price movement. For those looking for more volatility, the best currency pairs to trade at night may be Asian and Oceanian cross rates that do not include USD, such as the AUD/NZD, AUD/JPY or NZD/JPY. As their regular business hours are during the UK night session, these currency pairs fluctuate based on economic news and other developments coming from Asia and Oceania regions.