If you wonder when it’s best to trade Forex to get the best results and what the best hours to maximize your returns are, this article is for you. Read on to get the answers to these questions and find out the best trading hours.
While it can be a matter of personal preferences when to trade, and you can allocate your time depending on your daily schedule, let’s see when it’s best to enter the market to make higher profits and when it’s best to keep off trading.
Best days to trade Forex
You may have noticed that on some particular days, markets move more actively than on others. Take a look at the table below and check out the average volatility in pips for three major currency pairs (EUR/USD, GBP/USD, USD/JPY) depending on the business day:
As we can see, all three pairs register the highest volatility on Tuesday and Wednesday. With that in mind, we recommend entering the market during periods of high market volatility. This way, you’ll be able to take advantage of more trading opportunities and maximize your profit.
Now that we’ve figured out the best trading days, let’s talk about the most favourable trading time. Trading in the foreign exchange market takes place 24 hours a day five days a week. However, currency pairs can move at a different pace at different times. Although Forex is a decentralized market, a significant amount of money comes from banks, and they stick to a certain schedule.
Forex trading sessions can be divided into four major groups:
- North American (New York)
- Asian (Tokyo)
- European (London)
- Pacific (Sydney)
At the beginning of every session, the currencies are gaining momentum:
During the European session, all pairs containing the euro and the pound sterling demonstrate high volatility, with EUR/USD, EUR/GBP and EUR/CHF showing the largest trading volumes. Very often, the trend can commence in the European trading session and continue into the American session.
In the American session, the pairs containing the US dollar are on the rise: EUR/USD, USD/CHF and USD/JPY. During this time, the Canadian dollar, the USD/CAD pair, comes to life. During the American session, the trend may reverse. Besides, important economic reports are generally released in the evening. Those can trigger volatility spikes in currency pairs that include the US dollar.
In the Asian and Pacific session, the pairs containing the Japanese yen and NZD/USD are especially active. Throughout the night session, the market is tranquil since US and European banks are closed. The volatility is low, so the price often fails to gain momentum and break any key levels. So, the market is usually flat with the price trading within the range. For this reason, most traders prefer not to trade at night.
Best intervals for day trading
9.20 – 9.50 – The beginning of the European session. Trading volume is significant. While this trading interval offers a lot of trading opportunities, it’s highly risky as well. If you are a novice trader, we suggest that you don’t rush into the market at this point. Wait till the volatility settles a bit.
9.40 – 10.10 – Trading volumes are still significant, the quotes are moving fast, liquidity is sufficient. Now that the situation has already stabilized, it’s the perfect time to enter the market and place your orders.
10.25 – 11.10 – Volatility decreases, market participants lock in their profits and close their trades. This time interval is the best to start scheduling your next trades.
11.15 – 14.15 – Most breakouts occurring during this period are very inaccurate. Prices start moving sideways. Feel free to take a break. It’s best that you refrain from trading at this time.
14.10 – 15.25 – Most trends have already formed. There’s no sense in opening your trades now. But if you do, trade with the trend and be vigilant. Around 15:30, the trend may pause or even reverse.
15.20 -16.00 – The last 30 minutes of the day session, major market participants start adjusting their portfolios. It may seem that high volatility can bring you some good profits, we’d recommend staying on the safe side as the trading environment is too unpredictable now. Avoiding and managing risks is part of smart trading, remember?
All in all: The usual best trading time is 8 a.m. to 12 a.m. – it’s when trading hours of the New York and London exchanges overlap. These two trading hubs account for more than 50% of all Forex transactions.
When you SHOULD NOT trade
It’s funny how everyone is looking for the best time to trade. And few people think when it gets too risky to trade and when it’s better to avoid the market. It’s highly undesirable that you enter the market on:
- By the end of the week, we all get tired and tend to make illogical decisions. It can be hard to predict market behaviour at the end of the week. Friday is one of those days when the majority of traders suffer losses. Some traders lock in their profits to safely leave for the weekend. Others, on the contrary, jump into the market to make quick money. Prices start going up and down, especially in the afternoon, which can result in substantial losses.
- Banks are usually closed on holidays, market activity is low. On holidays, the risk of losing your deposit increases. You might be hoping for a spike in prices after the holidays, but the market likes to make adjustments. And they are usually not in your favour.
- News releases. We are going to offer you some obvious advice that no one takes anyway: do not trade the news. You can’t predict with 100% accuracy where the price will move after the release of significant news, a statement or a report. At this point, the price movement is often chaotic. So, we recommend exiting the market 1.5 hours before the publication. Refrain from trading for about the same amount of time after the news is released.
While Forex is open around the clock, all traders are human beings who need their rest. That’s why it’s essential to know the trading sessions schedule and market hours that determine volatility peaks. Enter the market when it demonstrates a strong momentum. This way, you’ll be able to monitor price developments better and identify trading instruments with the highest profit potential.