Did you know that market hours are increasingly important in Forex Trading? Many investors have always felt that there are better times than others to trade the currency market online.
Well, recent studies have shown how these impressions have a consistent basis of truth. In other words, it is a fact that there are the best market hours to do Forex Trading than others.
The topic of this short guide is the best time to trade foreign exchange. Don’t expect to find precise directions, however. The same studies we mentioned earlier also showed that the best time of day for trading is tied to specific time zones. Put simply: your best time to trade is not the same as that of an Italian trader.
What is the Forex Market Hours?
The Forex market does not exist as such; there is no physical market. It is delocalized, and the Forex market, as such, is created by liquidity providers: Banks, financial institutions, and Brokers. All these institutions are the ones that keep the market active during the hours that correspond to their time slot.
Each time slot corresponds to a market, and in the “jargon” of Forex Trading, they are called sessions. There is the European session (London), the American session (New York), and the Asian session (Tokyo).
However, there are four markets in reality since we have Australia (Sydney) that almost completely overlaps with the Tokyo stock market.
The hours of each session are:
|Session||GMT opening||Close GMT||* EUR / USD||* GBP / USD||* USD / CHF||* USD / JPY|
|European (London)||3 a.m.||Noon||80 pips||99 pips||121 pips||74 pips|
|American (New York)||8 a.m.||5 p.m.||67 pips||78 pips||101 pips||60 pips|
|Asian (Tokyo)||7 p.m.||4 a.m.||66 pips||79 pips||100 pips||66 pips|
* Each session and pair usually moves a certain number of Pips. This is an average, which varies over time.
Best Time of Day to Trade Forex for More Profit
For very short-term operations, the best hours correspond to those with the greatest liquidity and number of operations.
The session that undoubtedly moves the most volume of money is the European one. And the period of the greatest concentration of operations is the opening. Traders from half the world operate the opening of the European session. Some even change their lifestyle habits to be present and operating at that time.
Some reliable sources speak that the European session’s opening concentrates 35% of the market’s total movement.
The other time slot with the highest volume is the American session’s opening in order of importance. However, it overlaps with the European session, generating another good operating volume.
Later, during the American session, there may be sudden movements because of the announcement from the FED, employment data, etc. These are the data referring to the American economy. They are the ones that cause the most movements (and abrupt) in the currency market. It is important to be attentive to the economic calendar.
The Asian session is characterized by being a session with little movement and volatility.
Do the Days of the Week Influence the Forex?
As in all markets, there are statistics for everything. It seems that the middle of the week, Tuesday and Wednesday, are the days when trends and movements are most pronounced.
However, it is Friday afternoon and Sunday night when the market seems to be quieter and moves less money.
There is some logic, at least on the two days of less movement.
Let’s think of the Forex market as a commercial market, not just a speculative one. On Friday afternoon and Sunday night, few foreign exchange trades triggered by trade are going to occur.
However, it is logical that the enormous numbers of operations are concentrated in the middle of the week.
Best Times to Trade: Why They are Important?
Before giving you a series of suggestions on the best times to trade in Forex, listen to us. We want to explain to you why knowing and following the opening hours of the Forex markets is so important.
When trading, you need a certain market volume. This is because volume and price are some of the main factors driving asset movements. If there were no volumes, there would not even be liquidity. Therefore, the currency crosses would not even have the strength to be traded.
If you are trading major currency pairs, you must always be sure that the market is liquid.
By its nature, the Forex market is always open, but each day is divided into sessions, which in turn are formed by time slots. The latter varies according to the geographical area of belonging. It is here, in fact, that the question of the time zone comes into play.
In general, if you want to trade in local time, you will have to consider the time difference between different places. If you trade from New York, you can start trading at 8 a.m. and close at 5 p.m.
Tips to Invest in Best Market Hours
Having clarified the above, we allow ourselves some quick final advice for the benefit of newcomers:
- Avoid trading on Fridays. These are typically the “quietest” day because some major players such as banks and hedge funds close their positions before the weekend.
- Do not leave positions open overnight. Many Forex brokers will charge you a fee for holding them, resulting in erosion of profit.
- Trade only when you are in the right mood. Avoid investing when you are particularly euphoric or angry.
- Avoid trading during the holidays. A little rest never hurts. It will allow you to find the right serenity to resume your investments on your return.
- Beware of weekends, when events that are so significant as to affect open positions could occur.
- High trading volume does not always lead to profits.
In conclusion, therefore, in Forex Trading, it is necessary to operate with great caution. Always look for the best market hours. The (EUR / USD) and (GBP / USD) exchange rate intensifies when the London Stock Exchange is open.
The outlook, however, changes if you invest in Forex overnight. In that case, you will have to look for exotic pairs to aim for a profit with your trading activity. As I said earlier, therefore, the time zone becomes a decisive element in Forex Trading.