Many traders never even think about how choosing the best forex trading hours could impact their profits. Because the forex market is essentially open 24 hours a day, it is easy to find yourself one day trading in the morning hours and another day late in the evening.
This is why planning your forex trading times is essential when coming up with a trading strategy.
What Factors to Consider When Choosing the Best Forex Trading Hours?
Factors that make a trading session good or bad for you include your location, desired strategy, and favorite currency pairs among others.
The global forex market has four major trading sessions that overlap to make a complete 24-hour cycle. The Sydney session starts the trading week on Sunday evening for the Western Hemisphere (Europe and North America), whereas the New York session closes the trading week on Saturday at dawn for the Eastern Hemisphere (far east Asia) traders. Therefore, your location plays a crucial role in choosing the best trading hours.
Another factor to consider when identifying your forex trading market hours is volatility. The most active markets are always the most volatile, which means there are more trading opportunities. However, if you are not looking to be very active in the market, you can always go for a less active session that is likely to maintain steady trends as you place your positions.
One more factor that is likely to affect your decision when choosing your forex market trading hours is the most active currency pairs. If you have gained some expertise in say, USD/EUR, then you will be best placed in choosing a session where most traders trade the US dollar to the euro.
In this article, we will discuss in-depth the four main trading sessions and the factors unique to each session.
The Most Popular Forex Trading Hours
In the forex market, London is the most popular forex trading session, followed by New York, and then Tokyo, but London and New York can switch places depending on the instrument being traded. Sydney is the least popular forex trading session.
This is well demonstrated using the most traded currency pair in the global markets, the EUR/USD.
As demonstrated in the chart, New York attracted the highest trading volume for the EUR/USD pair, with London coming in second, while Tokyo was third. Again, the Sydney trading hours realized the least volume for the pair.
The whole cycle began at 10 pm GMT on January 31, 2023, and ended at 10 pm GMT on February 1.
When Is The Best Time To Trade Forex?
When two exchanges are open at the same time, forex trading is most profitable. You’ll see the most volume, activity, and opportunities during the London and New York sessions, for instance.
There are eight hours of trading between the two sessions on the euro forex market, which means traders can take advantage of a good amount of volume.
Traders in the Western Hemisphere can start trading early by targeting the Sydney session from 10 pm GMT to 7 am GMT. When the European and New York sessions open, they are likely to experience a surge in volume and volatility giving those who capitalized on the Asian sessions an advantage.
However, the best time to trade forex is when two major markets overlap, like London and New York.
Highlights From Key Trading Sessions:
Tokyo Trading Session
The Western Hemisphere returns to the Forex market after the weekend on Sunday evening with the Asian trading session. Tokyo capital markets are largely responsible for generating activity from this part of the world, which is why the session is named after them.
There are however many other locations with a considerable pull that are present during this period, including Australia, China, and Singapore.
Despite a large number of transactions, liquidity can be low during the session, especially when compared to London and New York.
London Trading Session
A few hours before the Asian Forex trading session closes, the European session takes over and keeps the currency market active. A large number of key financial markets are located in this time zone. Despite this, London’s name is used to identify the European session’s boundaries.
London is the center of Forex trading not only in Europe but throughout the world, owing to its favorable time zone. A large portion of daily Forex transactions takes place during the London session, which overlaps with Tokyo and New York.
A high level of liquidity throughout the session results in potentially lower spreads due to this increased Forex activity. Additionally, the London session is usually the most volatile Forex market hour as a result of the increased activity. Mid-session volatility usually dips before picking up again once New York opens.
New York Trading Session
In the North American session, Asian markets have already been closed for several hours, but European Forex traders are only halfway through the day. Most trading is the result of US financial market influences, but some factors from Canada, Mexico, and South America also contribute.
Morning hours are marked by high liquidity and volatility, both of which tend to subside once the Europeans stop trading.
To wrap up, although there are suggestions for the best forex trading times, there is no problem having your unique clock for forex market hours. You can hand-pick the best times to trade depending on your strategy.
Additionally, you still need to pick your own best trading hours depending on the time zone that makes things more comfortable for you.
But generally, trading on the Forex market can be as risky as it is lucrative. If you prefer a passive approach, you can always find a signal service provider or copy trader platform.
For additional information on that, consider visiting Telegram.Forex, where you can find the best forex trading signals available.