#3: When is the Best Time to Trade Forex

This is when liquidity is at its highest as many Forex market participants prefer trading during this time. Because this is a 24 hour market, there is always at least one active trading session. London is the most active financial hub in Europe, and it hosts some of the world’s largest banks. Many market participants and high-value transactions in London make the session the largest and most important in the world, accounting for about 34% of the daily forex volume. A 24-hour forex market offers a considerable advantage for many institutional and individual traders because it guarantees liquidity and the opportunity to trade at any conceivable time. However, although currencies can be traded anytime, an individual trader can only monitor a position for so long. We were surprised to see how many forex market hour solutions have faulty data in their charts.

During the Asian session, there’s likely to be more movement in currency pairs containing the yen, as well as Asia Pacific currency pairs, like AUS/USD. Forex trading activity reaches its maximum level when the New York trading hours open and US banks begin to work, and European dealers return after their lunch break. The influence of European and American banks is similar, so no significant changes take place in Forex compared to the start of the European trading session. However, after the termination of the European market volatility may be higher. The American trading session is more aggressive in trade than others. There are 4 main forex trading sessions with opening/closing hours based on the biggest financial centers.

Longer-term forex trading

There is high liquidity and volatility in the early hours during the London/New York overlap (1300hrs GMT – 1600hrs GMT), and most assets feature thin spreads. However, volatility and liquidity tend to decrease during the latter half of the New York session. The USD is the cue provider during the New York session, and traders can trade all the major pairs such as EURUSD, GBPUSD, USDCHF, USDJPY, USDCAD, AUDUSD, and NZDUSD. The US Federal Reserve is the central bank to watch, as well as major US data such as Nonfarm Payrolls, Trade Balance, GDP, Industrial Production, and Retail Sales. It is important to remember that forex trading hours can vary in March, April, October and November, as countries shift to and from daylight savings or summer times on different days. Forex market hours are derived from different geographical trading sessions, meaning you can trade forex around the clock. Here, we explain the different forex market opening times, and the best times to trade forex in the UK.

• Traders can benefit from knowing when the trading hours overlap.
• The American trading session is more aggressive in trade than others.
• Of course, the presence of scheduled event risk for each currency will still have a substantial influence on activity, regardless of the pair or its components’ respective sessions.
• Basically, this day trading strategy will teach you how to trade the London open.
• Here, we explain the different forex market opening times, and the best times to trade forex in the UK.
• Forex hours are based on the commonly accepted trading times and account for daylight saving in each location.

That kind of explains why volatility on Friday isn’t that too high as well. Similarly, for Friday, https://www.bigshotrading.info/ people want to pack up for the weekend, so they don’t really want activity trade that much.

London and New York Overlap Session

While some investors fear market volatility because of the increased risk, forex traders generally prefer greater volatility because they have the potential to earn higher profits. John Russell is an expert in domestic and foreign markets and forex trading. He has a background in management consulting, database administration, and website planning. Today, he is the owner and lead developer of development agency JSWeb Solutions, which provides custom web design and web hosting for small businesses and professionals. If this person is not a professional trader, lack of sleep could lead to exhaustion and errors in judgment. An alternative may be trading during the hours that comprise the European/U.S. Session overlap, where volatility is still elevated, even though Japanese markets are offline.

• Now let’s look at the characteristics of each of the trading sessions.
• In summary, the London breakout strategy can increase the probability of your success in the forex market.
• However, trading volumes fluctuate and are not equal across all sessions.
• You tend to experience increased volatility during Tuesday, Wednesday, and Thursday.

Julius Mansa is a CFO consultant, finance and accounting professor, investor, and U.S. Department of State Fulbright research awardee in the field of financial technology.

What is the London Breakout Strategy

Because London is in a different timezone, the market opens several hours before exchanges in New York. This gives traders a unique opportunity to enter into new positions. Forex hours are based on the commonly accepted trading times and account for daylight saving in each location. However, at this point, the opening hours do not reflect holidays or unexpected closures. On the other hand, central banks don’t share the same motivations as forex speculators. Coming in second place would be the period when the Sydney and Tokyo markets overlap. While not as volatile as the trading that occurs during the London/U.S.

This impacts the spread, with the price movement being depicted by the number of pips. There will be pairs which naturally have higher volatility, but numerous factors can come into play which can cause pairs to become more volatile. Forex market hours can have an effect on the volatility of a forex pair at certain points throughout the day, either increasing or reducing volatility. Theoretically, an effective time to trade forex is when the market is most active, so when the greatest volume of trades occur at one time. Therefore, the most optimal time to trade is during overlaps between open markets. The heaviest overlap is between the London and New York sessions. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Trade forex market hours in the UK

Of course, it may be best to stick with the majors (EUR/USD, GBP/USD, USD/JPY, and USD/CHF), as these normally have the tightest spreads. PairLondonEUR/USD83GBP/USD82USD/JPY36AUD/USD60NZD/USD64USD/CAD66USD/CHF58EUR/JPY80GBP/JPY102AUD/JPY86EUR/GBP40EUR/CHF30These pip values were calculated using averages of past data. Take note that these are NOT ABSOLUTE VALUES and can vary depending on liquidity and other market conditions.

• Although the market remains active the entire day, investors only trade for a select number of hours when there are solid market movements.
• These announcements can generate significant volatility depending on the market reaction, so every forex trader needs to know when they are published.
• A trader will then need to determine what time frames are most active for their preferred trading pair.
• The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate.
• Trading during the session overlaps or typical economic release times may be the preferable option if more substantial price action is desired.
• However, volatility and liquidity tend to decrease during the latter half of the New York session.

The London breakout trade signal was triggered, but after being already 1 hour into the London session, the trade has slightly moved against us. In this regard, for our stop loss trading strategy we’re going to use a time stop instead of a price stop. The most london session forex basic form of establishing the London range is to use the high and low of the previous trading session aka the Asia trading session. Our team of industry experts will reveal the missing link to successfully trade the London opening range breakout strategy.