Best Times to Trade!

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The Best Time to Trade Currencies

Trading currencies (sometimes called forex trading) is a popular way to trade binary options (not available for retail EU clients). Since currencies can be traded all day, many traders are searching for the perfect time to invest in a binary option based on currencies. This article, The Best Time to Trade Currencies, will show you the perfect time to invest in binary option based on currencies.

General risk warning
The financial services provided by this website carry a high level of risk and can result in the loss of all of your funds. You should never invest money that you cannot afford to lose.

What is the best time to trade currencies?

The biggest difference between currency trading and stock trading is that stocks can only be traded during a certain time period, but currencies can be traded all day from Monday to Friday. So is there a time, that can be defined as the best time to trade currencies?

A stock is traded at its home stock exchange. American stocks, for example, are traded in New York, Japanese stocks in Tokyo, British Stock in London. That limits the time of the day you can trade a stock to the time its home stock exchange is opened for trading.

To invest in a binary option based on a stock as the underlying asset, you have to adapt to the stocks trading time. Binary options based on a stock are only available when the stock’s stock exchange is open.

The big advantage of currencies compared to stocks is that currencies are traded on every stock exchange. Due to the different time zones, there is always an open stock exchange on which you can invest in currencies on weekdays. This has led to the wide-spread believe that it does not matter when a trader invests in a binary option based on currencies. Unfortunately, nothing could be further from the truth.

Just like stocks go through different trading periods during the day – near the end of the trading day the trading volume is usually significantly lower, for example – currencies experience the same kind periods, just in a little different way.

To understand why and how, let us take a look at the three stock exchanges with the highest volume of currency trading: London, New York, and Tokyo.

The opening hours of the three major stock exchanges overlap at some points:

  • London: 03:00 – 12:00 EST
  • New York: 08:00 – 17:00 EST
  • Tokyo: 19:00 – 04:00 EST

These overlapping periods feature a significantly different trading environment than the non-overlapping periods: There are more traders in the market, the trading volume is higher, and the market has more volatility. As a trader, you have to actively seek the trading environment that is best for your type of trading strategy.

How to find the best time to trade your strategy

Trading strategies are very different from one another. Some work better in a fast-paced environment with high volume and high volatility. Some are better suited for quieter market environments with less volatility and less volume. Depending on which strategy you use, you should trade it during the market times that are best for it.

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A trader of closing gaps, for example, will mainly be looking for exhaustion gaps. Exhaustion gaps occur during periods with low volume, when only few traders are in the market. If you are trading a similar strategy, you should try to find quieter market environments, when fewer traders are in the market.

During a time of the day when two big stock exchanges trade currencies simultaneously, quieter market environments are harder to find. Therefore, you will rarely be able to find exhaustion gaps. As a result, you will either be able to invest on significantly fewer signals or you will invest on signals of a lesser quality. Both options will reduce your profits significantly.

With a strategy like this, you should trade when only one major market is open. Luckily, you can find an ideal trading time throughout the entire time. That means, it does not matter where you live, you can always trade strategies specialized on quieter market environments with currencies.

With strategies that specialize on market environments with higher volume, on the other hand, you should do the exact opposite: You should seek out overlapping periods. They are perfect for traders looking to trade breakaway gaps and runaway gaps, for example.

The best time to trade currencies and to use this kind of strategy is from 08:00 to 12:00 EST, when the European markets and the American markets overlap. To a little lesser extent, the time from 03:00 to 04:00 EST, when Tokyo and the European markets overlap, also provide a good trading environment.

Depending where you live, executing that kind of strategy in the perfect market environment might require you to get up in the middle of the night. The better results will be worth the effort.

Best Times to Trade!

Mainly, you have three different types of trading session:

  • Asian Session
  • London Session
  • New York Session

This pretty much is run around the clock. Asian to London, London to New York, and New York back to the Asian session.

When does the trading session change schedule?

Since we have something called the Daylight Savings, Trading sessions’ schedule changes depending on the month of the year:

  • Summer Period (April to October)
  • Winter Period (October to April)

Summer Period (April to October)

The Asian session starts from 6 PM to 3 AM Eastern Daylight Time (EDT).

The London session starts from 3 AM to 12 AM Eastern Daylight Time (EDT).

The New York session starts from, 8 AM to 5 PM Eastern Daylight Time (EDT).

Winter Period (October to April)

The Asian session starts from 6 PM to 3 AM Eastern Standard Time (EST).

The London session starts from 3 AM to 12 AM Eastern Standard Time (EST).

The New York session starts from, 8 AM to 5 PM Eastern Standard Time (EST).

Everything’s all pushed back by an hour during this winter period, so please bear this in mind.

If all this may seem confusing, don’t worry, there’s a very simple solution to this.

Just Google Forex market hours, and there are different types of Forex session that you can look at, and just apply to your relevant time zone.

What is the best time to trade Forex?

This question is mainly directed for day traders.

If you’re like a swing trader or position trader, or you trade the longer timeframe, it doesn’t really matter when is the best time to trade the Forex market.

Because it’s irrelevant to you.

But if you’re a short-term trader (day trading), then it matters to know which is the best time to trade Forex.

London Session

For traders who want to trade the volatility, then the London session is the best.

Because you have the greatest number of transaction and volatility during the market hour.

London and New York Overlap Session

To be even more precise, the London and New York overlap is the best time to trade.

The London and New York session is open at the same time, this is the best time to be trading!

Here’s what I mean:

As you can see, the historical hourly trade activity increases during the London session up until it overlaps with the New York session.

This means that if you’re a day trader, and you’re trading breakouts and trends, London session is the time that you must trade because this is where volatility is the most active!

If you want to trade breakouts during the Asian session, there’s really not much meat to eat if you want to trade the trend.

What is the best day to trade Forex?

Just like the best time to trade Forex within certain hours, there are certain best days to trade Forex as well!

Generally, it’s Tuesday, Wednesday, and Thursday.

This day chart has been provided by Babypips.

In EUR/USD, you can see that the range of this pair during Sunday is 69 pips. Monday 109. Tuesday 142. Wednesday 136. Thursday 145. Friday 144.

You can see that across all the different currency pairs.

You tend to experience increased volatility during Tuesday, Wednesday, and Thursday.

Some of the reason could be because that on Monday, traders are still hanging over from the weekend, so they are not too active.

This is why volatility is quite tame.

Similarly, for Friday, people want to pack up for the weekend, so they don’t really want activity trade that much.

That kind of explains why volatility on Friday isn’t that too high as well.

Best Time of Day to Trade Forex

One of the wonderful things about forex trading is that the market is open globally 24 hours a day, 5 days a week, so you can trade at your own pace and on your own schedule, no matter where in the world you are. But that doesn’t mean that all hours of the day are created equal. While the forex market generally has the highest liquidity of all financial markets, it does have hours that are quiet, and hours that are bustling with action. See what the best time of day to trade forex is below.

And if you need a refresher on how forex trading hours work and an explanation of the major global exchanges and trading sessions, read our brief overview of how the forex market manages to stay open around the clock, all around the world – https://www.equiti.com/blog/posts/2020/august/how-long-forex-market-open-forex-trading-hours-explained/

The Best Time to Trade Forex

Day and night activity and high liquidity are what makes forex trading so special, but the best time to trade forex is when the market is experiencing the most activity and/or volatility, and it’s only natural that liquidity is at its highest when there are more people participating in the market. When there are more trades being made, the trading spread (the difference between the bid and the ask price) tends to tighten, providing more beneficial conditions for the trader to profit.

Volatility can be a good thing

Volatility is the rate and extent to which a currency price fluctuates, and while some traders have a fear of the word volatility, it can be very beneficial. If there wasn’t any volatility, prices would be static and there would be no opportunity to profit off of price changes, which is what forex trading is all about. And given the nature of the forex market’s major global exchanges, when more than one exchange is open, trading volume increases, along with volatility.

Forex Trading Session Overlaps

The best time of day to trade forex is when volatility is high, and the highest participation rate generally happens when two forex trading sessions overlap, as more than one major global exchange is open at once. The increased number of traders actively buying and selling currencies results in reduced spreads and increased volatility. But as we’ll see not all sessions, and their overlaps, are the same.

Sydney and Tokyo are mostly open concurrently and (together with the lesser Singapore and Hong Kong exchanges) make up the Asian trading session, which generally sees lesser movement than the others, though there is still higher pip fluctuation than when only one exchange is operating. Thus, the slight Tokyo-London overlap can be underwhelming as US traders are asleep, European traders are just starting their day, and East Asia enters the late afternoon.

The real action takes place during the London – New York overlap, as the two largest financial centres in the world combine forces. The US dollar and the euro are the two most popular currencies to trade, and this market overlap makes up the major chunk of worldwide trades. Some of the biggest moves are made during this period, especially when major reports come out of the US, and US traders establish their positions based on earlier European trends. This is one of the best times to trade forex, especially if you’re trading EUR/USD or GBP/USD currency pairs.

Best Currencies to Trade During Each Forex Market Session

Independently of each other, each major forex exchange still offers up some good trading opportunities.

Sydney – The trading day begins in Sydney. Although it is the smallest of the major markets, it experiences a lot of the early action when the markets reopen from the weekend break.

Tokyo – Tokyo makes up the bulk of Asian trading, with the Japanese Yen seeing a good amount of action. JPY currency pairs, especially USD/JPY, should be closely watched when the Tokyo market is the only one open, as the Bank of Japan has a strong influence on the market.

London – London is truly the trading capital of the world and it dominates the global currency markets. This session has a heavy impact on currency fluctuations given the Bank of England’s influence and the importance of the GBP.

New York – New York is second only to London in its importance as a global financial centre. It is closely monitored by foreign investors far and wide, given that the US dollar is involved in the vast majority of all currency trades. Movements in the stock market can also affect the dollar.

While there certainly are times to trade forex that are better than others, there is usually something to trade at all hours of the day and night. No matter which currencies you wish to trade, you’ll find a suitable time for it. You can experience these various trading hours, each with their own advantages, by opening a risk-free demo account and trading with $10,000 in virtual money. See what level of volatility you prefer and move on to the real thing.

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