What Is the Best Time for Forex Trading?
Many new forex traders and investors hit the running market. They keep an eye on different economic calendars. They trade voraciously on every data launch, viewing this 24/5 market as a suitable means to trade the whole day. This trading strategy can deplete the reserves of a trader promptly. It can also burn the most persistent traders. So, what can be done to avoid staying up for the whole night? If a trader gains a complete understanding of the Forex market hours and creates appropriate objectives, they have stronger chances of making profits.
Which Are the Best Hours in a Day for Forex Trading?
Forex trading is different due to its operating hours. The week for forex trading starts at 5 PM on Sunday and continues till 5 PM on Friday. Not every hour of the day is equally good to trade. The best hours in a day to trade is when the forex market is highly active. If over one of these markets are simultaneously open, there is an enhanced trading atmosphere. Therefore, there will be a lot of fluctuation in the currency pairs.
If one market is only open at once, the currency pairs get locked within a strong pip spread of nearly 30 pips movement. However, two markets opening together can see almost 70 pips movement, especially if big news comes. The best time of the day to trade in the Forex market with online forex brokers is during overlaps between open markets. An overlap is equal to a higher price range, leading to better opportunities. Below is a look at the overlaps that happen daily:
London and Tokyo: This overlap occurs between 3 AM and 4 AM. It sees the minimum amount of actions due to the time. Moreover, this 1-hour overlap offers very few opportunities to watch big pip changes happen.
Sydney and Tokyo: This overlap occurs between 2 AM and 4 AM. This overlap offers an opportunity to trade in higher pip fluctuations. Under this overlap, EUR/JPY is a perfect currency pair as they are the main influenced currencies.
US and London: This overlap occurs between 2 AM and noon. It is the heaviest overlap in the market. Over 70% of trades take place during this overlap. The EURO and the US dollar are the famous currencies to trade in this overlap. It is the best time to trade because volatility is pretty high.
Benefits of Trading in the Best Hours of the Day
The four major forex exchanges are in New York, London, Tokyo, and Sydney. Forex traders should commit their time to memory, with specific attention given to the time when two forex exchanges overlap. When a couple of exchanges open simultaneously, it increases the trading volume and adds volatility. Both these factors can advantage the forex traders. Traders usually fear market volatility. However, in the Forex world, greater volatility means better payoff opportunities.
Worldwide Forex Trading Markets Hours
Every exchange remains open weekly from Monday to Friday. Every exchange has unique hours of trading. However, from the perspective of an average trader, the four vital time windows include:
New York – 8 AM to 5 PM
London – 3 AM to 12 PM (noon)
Tokyo – 7 PM to 4 AM
Sydney – 5 PM to 2 AM
While every exchange works independently, all of them trade the same currency pairs. If two of these exchanges are open, the total number of traders who buy and sell a given currency actively increases drastically. The bid and ask in one fx market exchange impact bid and ask on other open exchanges immediately, increasing volatility and decreasing market spreads. It is the case with the following windows:
3 AM to 4 AM with open London and Tokyo exchanges
2 AM to 4 AM with open Sydney and Tokyo exchanges
8 AM to noon with open London and New York exchanges
Conclusion
Take benefit of the market overlap. Keep an eye on the latest news releases also when making a trading schedule. Investors and traders who want to improve profits should trade during the more volatile period while checking the launch of any new economic data. It allows both full-time and part-time traders to make a schedule that offers peace of mind. As a trader, you can rest assured knowing that opportunities won’t slip away while you take your eyes off the market or take some sleep.
