One aspect I really enjoy about the Foreign Exchange (Forex) market is that it's open 24 hours a day. It is only closed to most traders on the weekend. That means, you can literally place a trade at any time from Sunday 5:00pm EST to Friday 5:00pm EST.
That being said, a common question derives from that fact—what is the best time to trade Forex?
Let me answer that, but before, I want to remind you that this will apply mostly if you are an intraday trader (i.e. trading on time frames lower than 4-hour). Swing traders will usually take a look at the market throughout the day.
When To Trade Forex To Maximize Your Lifestyle & Profit?
The answer to the question above is fairly simple and vague: it depends.
I'll try to guide you in your decision with two key elements. Those are your available time, and preference. Both of these aspects will strongly influence your decision regarding when to trade Forex.
By the end of this article, I want you to decide on a specific time and stick to it (unless you have a VERY strong reason to change).
Before going into those two elements, I want to give you a bit of background concerning market sessions.
I want you to think only about the major sessions above. I could have added several more, including Frankfurt, Paris and Toronto but the goal is to keep it simple. The time zone used for the above times is GMT for simplicity.
If you are a day trader, the ultimate mistake you could make consists trading in-between market sessions. Most often, the volatility is extremely reduced at that time. The most volatile periods occur when two market sessions overlap (London & New York from 12:00pm to 3:00pm GMT, or Sydney & Tokyo from 11:00pm to 6:00am GMT).
Market Session Hours Tip
Alright, so let's get to what you need to consider and things you need to think about to decide when you'll trade…
What time is available in your day?
The first basic question to ask yourself is this: “What time do I have available in my day to trade?”. The truth is, whatever the time you have available, you'll find a way to trade.
Really write it down and map out your day.
If you want to day trade, you will need to focus on your screen for a period of time, meaning that if you work from 9:00am to 5:00pm, you can't use that time as trading time.
If you want to enjoy a dinner with your family daily, then you can't use that time to trade.
If, however, you watch Netflix from 7:00pm to 10:00pm, then you can cancel Netflix and use that time to trade.
If you are like most people, you'll probably say “Well, I don't have time to trade!”. I can tell that, for the majority of people, this isn't true. If you are looking to be a more productive trader, take a look at The 7-Hour Forex Trader: A Guide On Managing Your Time and A Forex Trader's Morning Routine: 5 Crucial Elements You Need To Apply.
Take a piece of paper and make a schedule of your day. Block the time for the things you can't change (work, school, family, commuting) and figure out where you are wasting your time, or usually have free time.
Next, I'll guide you through deciding whether you can easily trade at the time you selected.
What is your preference?
When it comes to currency trading, market sessions are similar, but quite different at the same time.
The overlap between the London and New York sessions is like a war. There is a lot of movement, and usually some news coming out during that time. On the other hand, the Tokyo session appears more calm and trading signals are usually respected due to the low number of players in the market. Several institutions dominate the Tokyo session's activity.
You want to think about the type of trade you are expecting to execute. For instance, a breakout trader might prefer to trade during the overlap of the New York and London sessions, where volatility will be at its highest point. That same trader could trade at the opening of the Tokyo session, since it overlaps with Sydney's session. He probably wouldn't be successful trading breakouts late in the New York session as volatility will be low and the probability of fake breakouts will increase.
The other thing to think about is that the Forex market isn't moving in the same way during all sessions.
Let's jump in!
A typical 24 hours
Sidney's session is usually very calm. Then, there is a spike in the volume transacted once Tokyo's session starts. This session, however, is still fairly calm compared to what's ahead. In my experience, trade signals are slightly more reliable during the Tokyo session.
Then, volatility usually increases during London's sessions, where breakouts and strong reversals are more frequent.
This is followed by the, usually, highest volatility of the day once New York's session starts. The cycle finishes with the second half of New York's session where the activity is usually low.
There are various exceptions to the 24-hour period described above. News will often impact the market's volatility strongly. The Tokyo session could be very volatile, especially if a news release occurs.
My personal take
I thought I'd finish the article by offering you my personal take on when to trade Forex. I have been exploring a lot. While starting as a swing trader, I didn't really think about the idea of market sessions. I would simply take a look at several charts at the close of the 4-hour and daily candles. That was it.
However, as I started to dive into day trading. I have been paying more attention on how to allocate my time.
I have two favorite time spots to trade Forex on an intraday basis. The first one is at the beginning of the New York session (say from 7:30am to 12:00am EST). At the time of writing this article, I am still developing my strategy for this session.
My second spot is the very beginning of Tokyo's session (from 7:00pm to 8:30pm EST). This is a period where I can benefit from a sudden increase in volatility, usually caused by an increase in institutional trading.
In the end, it all comes down to what you prefer. Your time zone might restrict you on the market sessions you are going to trade in. The good thing is that you do not have to stay up late at night because there's always activity in the Foreign Exchange market.
Think about the type of trade you prefer and ask yourself whether it is possible for you to take those trades during a certain session. Once you have selected a market session for which you are available to trade, make sure you test your strategy specifically on that session and set a routine to be at your computer daily to trade. You do not need to trade a whole session. Sometimes around 2 hours of trading is enough. You, most importantly, need to be consistent with what you do.
What session do you primarily trade? Comment below and let others know how you decided on that!