Collaborative Post

The Best Times to Trade the Forex Markets

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The foreign exchange is one of the few financial markets that’s accessible 24-hours a day, between Monday and Friday each and every week.

This global marketplace is also split into three broad geographical sessions; namely North America, Europe and the Asia-Pacific region. Each of these sessions has different characteristics, while specific currency pairings are more likely to be traded at certains times of the day than others.

In this post, we’ll explore the market in further detail while appraising the best possible times to trade the forex market.

Appraising the Forex Market’s Hours of Operation

Let’s start by looking at the forex market’s core hours of operation, which are governed by the opening and closing times of the leading international exchanges. For example:

  • North America: The North American trading session runs between 8am and 5pm EST, when the New York Stock Exchange (NYSE) is open for business. This is the second largest forex platform in the world, primarily because the US dollar is the world’s dominant reserve currency and participates in 88% of all trades.
  • Asia-Pacific: This session kicks off when the Tokyo stock exchange opens at 7pm EST, with this taking in the largest bulk of Asian trading (ahead of Hong Kong and Singapore). It closes nine hours later at 4am EST, with currency pairs such as the USD/JPY and GBP/CHF amongst the most popular pairs during this time.
  • Europe: The European session runs from 3am to noon EST, when the London Stock Exchange is open to traders. Interestingly, this exchange is a clearing house for the Euro and currently dominates currency markets across the globe, accounting for approximately 43% of worldwide trades.

Some investors will also argue that the trading day actually begins at 5pm EST, when the Sydney Stock Exchange opens.

While this is the smallest mega-market (the exchange closes at 2am) and part of the wider Asian-Pacific session, it sees a great deal of initial action and should be given consideration by traders of the Australian dollar.

What are the Best Hours for Forex Trading?

As we can see, the global market runs from 5pm EST on Sunday to 5pm EST on Friday, but it’s fair to say that not all of these hours are equally good or ideal for trading.

As we’ve already touched on, you can make an initial decision based on your chosen currency pairings, as some are likely to see higher trading volumes and volatility during particular sessions. This is a key consideration, as the best time to trade is typically when the market is at its most active.

With this in mind, you should also look to time your trades during periods where two of the international trading sessions overlap. There are several instances of this type during each 24-hour period, and you can strategically look to capitalise these as part of a wider strategy. Here are three three daily overlaps:

 

  • US / London (8am to noon EST): We’ll start with the heaviest overlap that occurs within the market, with more than 70% of trades taking place during the hours of 8am EST and noon. This is largely because the USD and the Euro are the two most popular currencies to trade, accounting for more than 23% of daily activity and driving volatility sky-high.
  • Sydney / Tokyo (2am EST to 4am EST): This time period isn’t as volatile as the previous overlap, but it still sees high demand for assets such as the EUR/JPY. It’s also a shorter period of time too, creating a minimal window in which to execute your trades.
  • London / Tokyo (3am EST to 4am EST): This one-hour overlap is the least active period in the market, primarily because most US traders aren’t awake at this time (although we’re now seeing a shift in the age of automated trading). Also, there’s little opportunity for large pip changes to occur during this time, but it’s worth keeping an eye on as a forex trader.