The Best Time to Trade

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The best times to trade the forex beginner strategy

The forex beginner strategy looks to take advantage of a trending market environment. In order for a trend to become established, there needs to be a significant shift in market sentiment so that either the buyers or the sellers take control, driving the price in one direction.

This shift predominantly establishes a trend. This generally happens when there is enough liquidity in the markets.

Even though forex is a 24 hour market from the opening of the Asian session on Sunday evening (GMT) until the close of the American session on Friday evening (GMT), there are optimal times to trade within that period, because there are times when the market is more liquid than others.

Financial institutions move the price

The markets are most liquid and active when banks and financial institutions are participating. They trade billions of dollars every day, causing huge shifts in the supply and demand of any particular currency. This ultimately causes the price of a currency pair to rise or fall. It is when the banks and financial institutions are moving the price that a trend is more likely to be established.

The best times to trade are with the banks and financial institutions

The following shows you when the markets are considered to be active. You should bear in mind that this information is very general and only a rule of thumb.

The forex market is generally most active and liquid in the European session, from 8:00 to 17:00 GMT.

If you limit your trading to these times while you are beginning to learn, then you are ensuring that you only trade in the most liquid market conditions that is likely to result in trending price movements.

The financial markets are particularly active at the open of these sessions, such as when the London market opens at 8:00 GMT and at the open of the New York session at 13:00 (GMT).

Trading activity can fall in “mid-sessions”

A mid-session is when traders in so called active sessions, become less active for a period of time. For example, during lunch or when traders in one region go home for the day.

An example is the time between 11:00 and 13:00 GMT, when European traders are at lunch and are also waiting for the New York session to open. Another example is 17:00 – 19:00 GMT when European traders go home for the day and US traders go to lunch.

Mid-sessions are something to consider if you enter during the middle of a trading sessions. To get the very best market conditions, you may want to avoid starting your trading day in a mid-session, if you observe that the markets seems to be low in activity.

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Session activity is not set in stone

Not all European and New York sessions are highly liquid all of the time and Asian sessions do not result in low activity and ranging/consolidating markets all of the time.

It is therefore useful to be able to recognise low liquidity periods directly on a chart.

Consolidation can indicate low activity

Times of low liquidity can be identified on price charts when consolidation is visible. This indicates that the market liquidity is low. The chart below shows price action that is “ranging” or moving sideways with no clear direction:

You can see that the market is consolidating during low liquidity hours and so in these times, you could stay out of the market until a trend has been established.

A highly liquid market can be recognised when there are large candle bodies, all the price is moving in a clear direction, as shown in the chart below:

You can see that the market is in a clear trend to the upside. These market conditions are ideal for trending strategies such as the beginner strategy.

You should note that this type of analysis – that is looking to see if the market is generally trending or ranging – should be carried out on the higher time frame that you determine the market direction on.

Summary

So far you have learned:

  • the beginner strategy is a trend following strategy and for a trend to become established, market volatility is needed.
  • forex is a 24 hour market, and there are times where the market is more liquid and volatile than others.
  • the market is most liquid when banks and financial institutions are actively participating.
  • the most active and liquid markets are considered to be when the European session starts at 8:00 GMT and finishes at 17:00 GMT.
  • mid-sessions are periods of lower liquidity in active trading sessions and happen when traders go to lunch or go home during active sessions.
  • highly active and liquid markets can be recognised on price charts.
  • a low liquidity market can be recognised when the price has entered a range with no clear direction.
  • a highly liquid market can be recognised when the candles have large bodies and are moving in a clear direction.
  • this analysis should only be carried out on the higher timer frame that you use to determine the market direction.

Best Time to Trade Forex

Maurice Draine
Contributor, Benzinga

Forex, also known as foreign exchange, FX or currency trading , trades in volume of $5 trillion per day. This is larger by itself than all other markets combined.

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The forex market provides the lubrication necessary to make the global economy function. When a business or government needs to purchase goods or services from another country, forex is where the other country’s currency may be purchased. Because currencies exist around the globe, there is always a currency somewhere which can be traded at any time, day or night.

But just because currencies may be traded 24 hours a day doesn’t mean all trading hours offer equal opportunities. Understanding the advantages and disadvantages of each hour can make a significant difference in your Forex trading success .

The ability to trade 24 hours a day is mostly a function of the different time zones each the country’s currency listed on the exchange. The need to be able to sell or purchase currencies at any time is also another key reason why currencies are traded around the clock. Domestic markets, such as the New York Stock Exchange, open at 9:30 a.m. EST and close at 4:00 p.m. EST every day, Monday through Friday.

Forex, on the other hand, opens at 5 p.m. EST on Sunday and remains open until 4 p.m. EST Friday. There are technical reasons why certain times are better to trade than others. But first, you must account for the most important factor in trading – yourself.

It may be tempting to trade at all hours of the day. However, burnout can quickly set in and blur decision-making. Technical traders can benefit from having set trading hours where patterns may be compared against one another against the same time frame. For the fundamental trader, news releases are often released on the same day or at the same time, making the planning of possible trades more predictable in your weekly trading schedule.

Market Hours

Forex is a network of international exchanges and brokers. Trading hours are determined when each participating country’s exchange is open. The first step in determining the best time to forex is to understand when each major market is open. There are four major markets:

  • Sydney – Opens at 5 p.m. EST and closes at 2 a.m. EST
  • Tokyo – Opens at 8 p.m. EST and closes at 4 a.m. EST
  • London – Opens at 3 a.m. EST and closes at 12 p.m. EST
  • New York – Opens at 8 a.m. EST and closes at 5 p.m. EST

Even though markets open and close throughout the day, it doesn’t mean a particular country’s currency stops trading. Local markets provide domestic banks, businesses, fund managers, and investors to actively buy and sell their local currency in the most transparent time of the trading cycle. The ability to trade any currency at any time still exists throughout the day.

However, trading domestic currencies when the local market is closed may expose traders to unknown market factors which could impact valuations by the time the local exchange opens again. If you’ll be focusing on trading a single currency, consider setting your trading hours to match the time the local exchange is open.

Trading your preferred currency during the open market hours will provide the best liquidity.

Market Overlaps

A market overlap exists when two exchanges are open at the same time. There are fifteen foreign exchanges. But the four markets mentioned earlier are the largest and most important. Two markets are open simultaneously:

  • Sydney and Tokyo overlap between 8 p.m. EST and 2 a.m. EST
  • London and New York overlap between 8 a.m. EST and 12 Noon EST

During market overlaps, most traders are active. More forex traders mean the markets are more volatile. Although volatility may be feared by investors, it does provide price movements. When only a single market is open, prices can stagnate. Stagnation results in fewer trades and less opportunity to buy and sell currencies. So, when markets overlap and volatility increases, so too does the ability to trade in a more liquid and hopefully profitable market.

News Impacts

Markets move for two reasons, investor sentiment about the future and news that breaks during the present. News releases can shape how investors feel about the long-term prospect of any given currency and set scheduled entrance and exit points. News used for long-term investing is usually released at predetermined dates and times, planning for all outcomes possible. Some of the major news releases used in Forex trading include:

  • Retail sales figures
  • Non-farm payrolls
  • Unemployment rates
  • Consumer price indexes
  • Gross domestic product
  • Interest rate announcements
  • Consumer confidence indexes

These and other regular news releases can be useful to determine which currencies may be strengthened or weaken against another currency. Understanding how one or more economic indicators impact currency pairs can help fundamental traders. Where 24-hour trading becomes difficult is when sudden, unexpected news shakes the marketplace.

If a major news event occurs overnight, traders may be exposed to a tremendous downside if unable to trade until the next morning. Unlike the New York Stock Exchange, which opens and closes daily and has the ability to halt trading, forex never closes – even while you are asleep.

Setting a Schedule

The number one way to avoid burnout while maintaining consistency in your trades is to set a schedule. Examine what works best for you and your family. From there, choose each of the following to narrow down your most optimal trading time:

  • What time each market is open
  • When markets overlap for the currency or currencies you trade
  • When important news announcements are made

You may find the slower times before overlaps occur as a time to prepare for your upcoming trades. Or perhaps a news release opens an opportunity outside of your schedule. Flexibility may present short term opportunities, but consistency usually wins in the long run.

Final Thoughts

Expand your schedule to include reading news releases, researching potential trades, and furthering your general forex knowledge. Doing so will improve your trading success.

What is the best time of day to trade forex?

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There are 2 ways to profit in Forex:

  1. Trade on smaller time frames using leverage/multiple lots
  2. Trade on longer time frames using small positions and using a large enough stop loss so typical price movement does not stop you out on every trade

Trading #1-It is usually best to trade on short time frames during periods of high liquidity and high volatility when the most activity occurs. This will usually result in your targets being hit quicker. The movement tends to be more linear during the volatile times, and more sideways/choppy during the least volatile times.

Best Time to Day Trade the EUR/USD Forex Pair

Best hours of the day to day trade the EUR/USD

Image by © The Balance 2020

The allure of forex day trading is that you can trade 24-hours a day. Unfortunately, that doesn’t mean you should. Day traders should only trade a forex pair when it’s active and there’s lots of volume and transactions occurring. The EUR/USD has certain hours which are acceptable for day trading because there is enough volatility to generate profits, which are likely higher than the cost of the spread or commission. To be efficient and capture the largest moves of the day, day traders hone in even further, often day trading only during a specific 3–4-hour window.​

The Impact on EUR/USD Volatility

The forex market operates 24-hours a day during the week because there’s always a global market open somewhere due to time zone differences. However, not every global market actively trades every currency, so different forex pairs are actively traded at different times of the day.

When Europe is open for business, pairs that involve the euro (EUR) or British pound (GBP) are more actively traded. When the U.S. and Canada are open for business, pairs that involve the U.S. dollar (USD) and Canadian dollar (CAD) are more active.

If day trading the EUR/USD, the times that are likely to be most active for the pair, on average, will be when London and New York are open. Those markets are open between 0800 and 2200 Greenwich Mean Time (GMT). To see major market hours in your own timezone, or your broker’s (charts) time zone, use the forex market hours tools.

Acceptable Times to Day Trade EUR/USD

The hourly volatility chart shows how many pips the EUR/USD moves each hour of the day (times are in GMT). There is a significant increase in the amount of movement starting at 0700, which continues through to 2000. After this, movement each hour begins to taper off, so there are likely to be fewer big price moves day traders can participate in.

Day traders should ideally trade between 0700 and 2000 GMT. Trading outside of these hours, the pip movement may not be large enough to compensate for the spread or commissions.

Volatility changes over time, but the most volatile hours generally do not change too much. 0700 to 2000 GMT will continue to be the most acceptable time to day trade, regardless of whether daily volatility increases or decreases. Note that daylight savings time may affect trading hours in your area.

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