Best Time to Trade Forex

While the forex market is open 24 hours a day, 5 days a week, it doesn't mean all trading hours are created equal. As a result, certain times or periods of the day offer more activity and volatility compared to others, leading to potentially more trading opportunities.

This article discusses the best times to trade currency pairs, taking into consideration aspects such as volatility, market volume and news releases. Certain trading strategies are best suited to specific times of the day.

Whether you are a beginner or an experienced trader, read on to find out the best times to trade forex and how to maximize your profits.

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What Are Forex Market Hours?

Traders can trade forex pairs 24 hours a day, 5 days a week, from Sunday evening until Friday night. However, it is not evenly divided into hours. Instead, the forex market is divided into four main trading sessions based on geography — the Sydney session, Tokyo session, London Session and New York session or Pacific, Asian, European and American.

For example, the Pacific session, in territories such as Australia and New Zealand, is the first of the day, followed by the Asian session. Then comes the European session, and after that, the final session of the day is the U.S. or New York session. 

Market Overlap

When trading forex, it is important to be aware of the overlap between trading sessions, which is generally when most of the trading activity occurs. For example, the London session starts at 8 a.m. local time, which is 3 a.m. EST. The New York session opens at 8 a.m. EST when it is 1 p.m. in London, so the sessions overlap. The overlap of these sessions is the most active time of the day for forex trading. 

The rise in activity during overlaps creates high volatility, which can lead to an increase in trading opportunities. 

3 Best Forex Trading Sessions

So you know when you can trade forex and that there is an overlap between various sessions globally. But what are the best forex trading sessions?

European-North American Overlap

The European-North American forex overlap occurs from 8 a.m. EST to 12 p.m. EST, as this is the time when both markets on each side of the Atlantic are open. As a result, the market experiences a lot of trading activity and liquidity, making it a good time to trade for those who want to take advantage of the volatility and volume.

Asian European Overlap

The Asian-European overlap forex trading overlap refers to the period of time when the Asian and European trading sessions cross over, resulting in an increase in trading activity and liquidity. The overlap can create volatility in the market, providing a faster-paced market and the potential for more trading opportunities.

Forex traders should note that fewer news releases occur between these two periods.

Australian Asian Overlap

The Australian Asian forex trading session overlap is the period when the Sydney and Tokyo forex markets are open simultaneously, between 8 p.m. EST and 2 a.m. EST. Given that the period does not include London or New York — the two busiest — it is less volatile and liquid than the other overlaps, although it does increase during the crossover period.

Certain currencies, such as the AUD, JPY and NZD, may see an uptick in activity during the overlapping period.

How News Events Impact Forex Trading

Forex trading can be impacted by several factors, with news being one of them, especially if you are more of a technical analysis-focused currency trader. 

For example, volatility rises around major news releases, sometimes resulting in wide price spikes that threaten to stop traders out of positions. As a result, it can be difficult to trade during these times, with the market too volatile to make accurate predictions.

Liquidity will generally increase around news releases, making it easier to get in and out of trades.  

However, it is important to be aware that news releases can provide a sharp change in market sentiment, with traders potentially becoming more bullish or bearish on a particular currency based on positive or negative news for the country's economy. 

• Retail sales figures: This data is released each month and measures the amount of money consumers spend on finished goods. It is a good indicator of economic growth, as it shows how much money consumers are spending.
• Non-farm payrolls: Non-farm payroll data measures the number of jobs added to the economy in a given month, except for farm workers and workers in some other job classifications. It is closely watched as it shows how many people are being hired.
• Unemployment rates: The unemployment rate calculates the percentage of the labor force that is currently unemployed, showing how many people are out of work.
• Consumer price indexes: The consumer price index (CPI) measures the shift in the prices of goods that consumers buy based on a certain basket of goods. It is a widely used measure of inflation because it shows how much prices are rising.
• Gross domestic product (GDP): GDP calculates the total value of goods and services produced in a country in a given year. It is considered the most comprehensive measure of economic activity and is used to measure the size and health of a country's economy.
• Benchmark interest rate announcements: Central banks such as the U.S. Federal Reserve make benchmark interest rate announcements, setting the interest rates that banks charge each other for loans. The announcements usually result in significant volatility in forex markets, especially in the currency impacted. 
• Consumer confidence indexes: Consumer confidence is measured via a survey and provides data on the level of confidence consumers have in the economy.

Benefits of Sticking to a Trading Schedule

Traders gain various benefits from sticking to a trading schedule. For example, having a plan and including a schedule for your trading day will help you make more objective decisions. You know what you will trade and have an idea of when you are going to trade it, taking the guesswork out of the equation and reducing the probability of making emotionally charged decisions.

In addition, sticking to a trading schedule means you are less likely to overtrade or make impulsive decisions. As a result, it will help you to protect your capital and hopefully improve your long-term trading results.

Take the Next Steps to Trade Forex

Trading forex can be difficult if you don’t select the broker that works best for your needs. The fees may be high, or the broker may not provide the pairs you want to trade on its platform. Below is a list of some of the top forex brokers available.

Identify the Most Profitable Period For You

While some periods may seem more appealing than others, the best time to trade forex will depend on a number of factors, such as your trading style, the pairs you are trading and your risk tolerance. 

The most active times in the forex market are during the overlap of the major trading sessions, and if you are a short-term trader, you will want to trade during these times. However, if you are a longer-term trader (swing or position trader), you may find more profitable opportunities to trade outside of these times.

The optimal way to find the best time to trade forex for you is to work out what provides you with the most profitable trading opportunities. You can do that by tracking data and monitoring which hours of the day give you a higher percentage chance of success.

Frequently Asked Questions