What are the best times to trade forex?
The forex market is open 24 hours a day, five days a week, so there are always opportunities to trade. However, the best times to trade forex are when there is a high level of market activity and volatility, which can increase the chances of finding profitable trading opportunities.
Asian market open
The Asian forex market is usually the session with the lowest volatility, but there can be good trading opportunities between 8 am to 10 am Tokyo time. The most attractive markets to trade are USDJPY, AUDUSD, AUDJPY, and GBPJPY.
Early in the Tokyo session, large traders may search for stop-loss orders around support and resistance. Usually, these moves are short-lived, and a reversal trading opportunity can present itself. However, should stop loss orders be significant, a strong trend can develop, so if the market does not reverse quickly, look to follow the trend.
The Japanese stock market opens at 9 am Tokyo time, which can increase volatility in the USDJPY and other yen crosses. A trend can develop lasting from 9 am to 10 am, which day traders can follow.
London is the largest forex market in the world and presents the most trading opportunities. While there is no official time the London market opens, 7 am London is usually when the market volatility increases, and most are active around 8 am London time.
7 am to 8 am London time
Between 7 am to 8 am, there are usually profitable range trading opportunities as London traders react to moves during the Asian session. The market is generally quiet but can move quickly when large traders become active.
8 am to 10 am London time
This is the most active period of the London session, and usually best to focus on trend trading opportunities for day traders. However, longer-term traders will also find this is the best time to trade as the market ranges are large.
10 am to 1 pm London
Over this period, the forex market becomes quiet as traders wait for the US market to open. However, if there is a significant move in the London morning, the market can reverse as London traders take profits and reduce risk before US economic announcements.
9:30 am to 10:30 am New York time
The US equity markets can have a significant impact on the forex market. Should US equities rise, it signals a "risk on" condition, and markets like the USDJPY, GBPJPY, and GBPUSD are likely to increase. Volatility can be the highest throughout the day, so active traders should consider trading this session.
US economic indicators can cause large moves in the forex market and be profitable to trade for skilled traders. Economic data releases such as Non-Farm Payrolls, Gross Domestic Product (GDP), and inflation reports can significantly impact the forex market in the short and long term.
Trading close to a US economic announcement is high risk and reward as the market can move quickly, and spreads can sometimes widen, making it more difficult to judge the market. Therefore, for those wanting to trade, it is essential to be prepared and understand the potential impact of an economic announcement.
While UK and European economic data usually have a limited impact on the forex market compared to US economic data, it is wise to follow all announcements as, occasionally, a surprise announcement can cause a significant move.
Central bank announcements
Central bank policies have the most significant potential to impact the forex market. Changes in monetary policy to change official interest rates or the money supply will create large moves traders can take advantage of the increase in volatility. While changes in monetary policy are important, speeches by central bank officials regarding future monetary policy also create chances for forex traders.
It's essential to remember that different currency pairs may have different levels of volatility at different times. Therefore, traders should consider their trading style and preferences when deciding the best times to trade forex. It can be beneficial to focus on becoming an expert in one or two sessions rather than trading all day, as your ability to judge the market will improve.