What is the best time to trade?

Many beginner forex traders start trading the markets straightaway. They follow different economic calendars and trade fast when important data is released, in order to make the most out of the 24/5 forex market. However, this approach can result in a trader quickly losing their capital and leading to burnout, even for the most dedicated traders.

To avoid being glued to your screen and enjoy trading in a way that is also in line with your lifestyle, you should pick certain hours of the day that are busy and offer plenty of opportunities.

The forex market is open throughout the week, all day from 5pm Sunday to 5pm Friday, offering plenty of occasions to enter and exit positions effectively.

Best times to trade

While you can forex any time of the week, even on the weekend, this doesn’t mean you should. Trading conditions can differ massively from one session to the next. Trading activity and volume for certain sessions may be very low and spreads may widen dramatically or unpredictably. The best time is when sessions overlap.

Indeed, during certain periods of the day there is more volatility than others, most famously during the 8am to noon crossover of the New York and London exchanges. More particularly, if you are trading certain currency pairs, the best time for you may be different as most of the trading activity for a currency pair will be when the two currencies’ trading sessions overlap.

If you are trading the AUD/JPY, then the best time for you to trade will be when both Sydney and Tokyo sessions are open.

Remember:

• Focus your trading during the trading hours for Tokyo, London, and New York which are considered the most active and liquid trading sessions.
• Most traders choose to trade when one of these three markets are open.
• Now, if you are looking for the peak of trading activity, then choose to trade when two or more trading sessions overlap. During overlapping sessions, trading fees are lower and opportunities are higher.

Not all days of the week are to trade

The first and last day of the week are the worst for traders. So, if you are trading forex, make sure you avoid the first 24 hours of the trading week as activity is very slow following the weekend.

Markets and market participants are slowly getting into the rhythm of the new week and digesting any market updates and news. So, knowing this, as a forex trader, perhaps it is better to wait and avoid trading on a Monday.

Fridays are also risky days. The last 24 hours of the week are also slow and with low liquidity, with many traders avoiding taking new risks ahead of the weekend.

For some traders, Friday is even worse than Monday as opening a position ahead of a 48-hour window, where anything can happen, especially gaps, which are big breaks in price with no trading happening in between, can be quite stressful for a trader, not to mention, unnecessarily risky.

For this reason, traders who trade forex tend to choose sessions on Tuesday and Thursday. These days indicate that trading activity is at its best as most traders have settled in for the week, enough time has occurred after Monday and there is also enough time before the weekend comes.

Forex trading hours

Forex is based on four main trading sessions across the world’s major financial centres, New York, London, Sydney, and Tokyo. The market opens at 5.00 p.m. on Sunday and runs until 5.00 p.m. on Friday.

نیویورک

New York is one of the biggest forex markets in the world, and opens from 8 a.m. to 5 p.m. Foreign investors keep track of the New York trading session because around 88% of all forex trades involve the U.S. dollar. Price movements on the largest stock exchanges in the world, New York Stock Exchange (NYSE) and Nasdaq, can also affect the value of the U.S. dollar. Major companies reporting earnings, giving future guidance, or announcing mergers can make the dollar move instantly.

توکیو

The first Asian trading session to open is Tokyo in Japan from 7 p.m. to 4 a.m. During the time the Tokyo market is open, then the USD/JPY is a great choice.

سیدنی

Sydney (Australia) opens the week from 5 p.m. through to 2 a.m. There is significant activity on Sunday afternoon because retail traders and financial institutions are reacting to news that occurred over the weekend, after the long pause since Friday afternoon.

لندن

The London session is the most active market and is driven by other European financial centres, such as Frankfurt and Paris. Some general characteristics of this session are:

There is high liquidity. This session usually has high liquidity, which basically means traders can open large positions without these having a great impact on prices.

Major currency pairs have increased activity. Currency pairs that involve the euro, British pound, and Swiss franc experience increased activity.

Euro news has an impact. European economic reports usually generate immediate market reactions as many traders actively follow European news.

Market trends carry over. The London forex session often sets the pace for the rest of the trading day, with trends sometimes carrying over into the New York session.

Impact of news releases on forex markets

Understanding the markets and how they overlap can help a trader to arrange their trading schedule, but there is another factor to remember: news releases.

A big news release can instantly cause high volatility during a trading period that is usually slow.

As you are undoubtedly already aware, foreign investors have a more positive view of a country’s economy the more rapidly its economy is growing. In addition, countries with strong economic growth often tend to attract foreign capital from investors looking for profitable opportunities. Therefore, good investment opportunities make a country’s currency stronger.

Additionally, a country with higher interest rates on its government bonds attracts investment capital, as foreign investors go after opportunities with high returns. In other words, stable economic growth is often associated with attractive returns and interest rates.

Conclusion

Timing in trading is paramount, so choosing the precise time where there is the biggest activity in the markets is key. Ensure that you watch an تقویم اقتصادی and have a good understanding how your selected currency pair reacts to different events. Central bank announcements have a big impact on currency movements for example. Before and after the release of crucial data, currency pairs tend to be the most volatile. Time your trades wisely, watch and monitor how your trades respond, adjust and repeat.

Once you have a clearer idea of how these events affect your trades, you will be able to choose the perfect time. Obviously, many traders have a busy schedule and not every one of us has the time to monitor their screens 24/7. Organise your trades and keep a healthy lifestyle so you make the right trades at the right time, without overtrading or being taken over by emotion.

سلب مسئولیت: This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.