Timing Is Everything: The Best Times to (and Not to) Trade Forex
The forex market is active 24 hours a day, seven days a week. That means traders can log into their trading platform of choice and move currency around. Despite this 24/7 availability, it’s unwise to trade around the clock without a specific strategy in mind.
When trading forex, timing can be everything. There are ideal times to trade and not-so-good times to trade. Let’s take a look at the best times to trade forex and the best times to stay away from the market.
What are the forex market hours of operation?
The Tokyo Stock Exchange is open Monday through Friday from 9-11:30 a.m. and then from 12:30-3 p.m. Japan Standard Time (GMT+9), which is 12 – 2:30 a.m. and 3:30 – 6 a.m. London Time (GMT).
Important economic releases in Japan typically occur between 9:30 p.m.-3 a.m. Greenwich Mean Time, so traders should remember to pay close attention to any breaking news released at this time. This can help them take advantage of price movements before the European market opens.
The Sydney Stock Exchange is available Monday through Friday between the hours of 10:15 a.m.-4:15 p.m., Australian Eastern Daylight Time (GMT+11) or 11:15 p.m. – 5:15 a.m. GMT. Unlike the Tokyo Stock Exchange, the Sydney Stock Exchange doesn’t close for lunch. It also doesn’t offer pre-market trading or after-hours trading opportunities.
The London Stock Exchange is available from Monday through Friday between the hours of 8 a.m.-noon and 12:02 to 4:30 p.m. GMT.
Like the Tokyo Stock Exchange, the London Stock Exchange takes a quick break from noon to 12:02 p.m., offering eight hours and 28 minutes of active trading hours, which are some of the longest across the globe.
The London Stock Exchange also offers extended trading hours, from 5:05 to 7:50 a.m. and from 4:40 to 5:15 p.m. GMT.
Are there overlaps in forex trading times?
The U.S. and London forex markets overlap from 8 a.m. to noon EST, or 1 to 5 p.m. GMT. This four-hour overlap sees the highest trading volume and is a great time for trading opportunities.
The Sydney and Tokyo forex markets overlap from 2-4 a.m. EST, or 7 a.m. to 9 a.m. GMT. This two-hour time frame isn’t as liquid as the U.S. and London overlap but still offers ample opportunities for skilled traders.
The London and Tokyo forex markets overlap from 9 to 10 a.m. a.m. GMT. This hour-long overlap experiences little trading action simply because the time frame is so short and most U.S. traders aren’t awake.
What are the best times to trade forex?
When it comes to the best times to trade forex, Monday mornings aren’t ideal. However, Monday afternoons are an entirely different story. This is because the market starts to warm up after the morning hours, and trade volume increases. Again, you can’t expect the forex market to reach peak liquidity during this time, but it’s still well worth taking a peek at the market when Monday afternoon rolls around.
When Multiple Trading Sessions Overlap
London ranks as the busiest trading session, with New York not far behind. That’s why you can expect the session overlap to be a busy period that provides plenty of trading opportunities. Many professional traders (or at least those who trade full time) often consider 14:00 GMT to be the best time to enter the market because it’s when London is drawing to close and many are awaiting the shift to New York. While price movements can be choppy and somewhat unpredictable during this time, the big swings open the door to greater opportunities for profit.
There is another overlap between Sydney and Tokyo that occurs between 12:00-7:00 GMT. While not as prominent as London/New York, it still proves to be a smart time to trade.
During Times of High Liquidity (i.e., Tuesday through Thursday)
Trading volume picks up during Monday afternoons, but the forex market doesn’t reach peak liquidity until Tuesday at the earliest. The forex market is most noticeably active during the middle of the week, specifically Tuesday morning through Thursday. If you’re looking for liquidity, keep the bulk of your trading locked to the middle of the week.
Every trading session or window has the potential to get extremely busy, but of all the trading sessions, one remains far busier than all others. The London sessions (sometimes listed as the European sessions) are known for being the times when trading peaks, with approximately 30% of all trades taking place during these time frames.
What are the worst times to trade forex?
Late Sunday/Early Monday
Late Sunday through early Monday is one of the worst times to trade forex. Everything remains slow during this time. In many ways, this time frame functions as a reassessment period, with many using the crossover to plan for the week ahead instead of actively trading. A larger percentage of investors avoid making trades as the new week dawns, and it’s smart to follow their lead.
National holidays offer rest and relaxation, but fight the urge to use this free time to participate in the forex markets. Banks are one of the biggest influencers on the forex market, so their closure on holidays dramatically influences the market. When they’re not open and operating, the number of forex transactions being carried out reduces. This can lead to a static market or erratic price behavior. It’s best to avoid trading altogether on national holidays.
During Major News Releases
Financial reports, economic data, and political updates drive the forex market. While it’s tempting to want to trade during major news events, it’s best to avoid doing so—unless you have a firm understanding of how to trade the news.
Updates, data, and reports can have an unpredictable effect on the forex market, especially when news occurs unexpectedly. Track major news releases through a forex economic calendar, so you can stay ahead of what’s coming. Here are a few news-related events that can impact the forex market:
The Consumer Price Index (CPI) report is a weighted average of goods and services consumers use. This includes numerous factors, such as food, transportation, medical care, and even medications. The CPI is determined by assessing the price changes for the “basket” items of goods and services and averaging them out. Any change in the CPI is used to assess the cost of living. The CPI is one of the statistics used most often for identifying times of deflation and inflation.
A trade deficit takes place when a nation’s imports exceed its total number of exports. While a trade deficit is technically a neutral occurrence, large deficits can have a negative influence on the economy. However, a trade deficit can indicate a strong or strengthening economy and can sometimes result in economic growth.
Consumer consumption refers to the total amount of money households spend on nondurable and durable goods. The spending level is often used to indicate overall consumer confidence.
Gross domestic product (GDP) represents the total market value of goods and services produced within a certain economy. GDP data is typically used to gauge growth and economic activity levels within a nation’s economy. GDP helps economists identify current and past trends and make better financial predictions.
The unemployment rate is a popular method economists use to understand the current state of a country’s economy. Known as a lagging indicator, the unemployment rate will typically increase even after an economy experiences improvement, and it takes some time to drop. The rate often confirms any other indicators that may already exist.
The unemployment rate is calculated by dividing the total number of unemployed citizens by the number of employed adults.
During Times of Strange Price Action
There will be times when a forex pair throws up strange price action without any rhyme or reason. Random moves may give the market an exciting feeling, but they generally create a rocky trading environment. It can be extremely difficult to understand what’s causing such price shifts and the general market sentiment. For that reason, when strange price action occurs, it’s best to wait out the storm until it’s over.
Asian Sessions When Liquidity Is Lower, Particularly Near End-of-Day Crossover Time
Low levels of liquidity, which plague Asian sessions, rightfully represent a red flag. The number of resources traded during Asian market sessions is often very low, making the average pip movements too low to cover the high spreads of Asian currencies. This is especially true near the end-of-day rollover time.
What are the popular forex currency pairs to trade?
Along with identifying the most popular trading windows to time forex trades, you should also understand the most popular currency pairs that are regularly traded among global forex traders. The more familiar you are with these popular currency pairs, the more effectively you’ll be able to use them in your trading strategy.
Some of the most popular currency pairs include:
- EUR/USD: By volume, this is the most popular forex pairing, and the currencies involved represent the two largest economies in the world. Its sheer size and liquidity make EUR/USD more stable than other currency pairs with lower liquidity, which makes it a popular safe-haven pairing when traders are looking to move funds out of volatile positions.
- USD/JPY: For traders seeking a safe-haven pairing that has a foothold in the eastern economies, USD/JPY is a great choice. Like EUR/USD, it offers good liquidity and stability and can be more insulated from economic events occurring in western economies. At the same time, this pairing’s location in Asia can make economic news and events taking place in eastern countries influence it more.
- GBP/USD: While GBP/USD has always been a major currency pair in terms of popularity, volume, and the economies the currencies represent, Great Britain’s exit from the European Union has separated the British pound a little bit more from the euro, which has increased its volatility but also created opportunities for diversification and profit-seeking.
- EUR/GBP: Although this is a minor currency pair due to the absence of USD, EUR/GBP is still important and potentially lucrative for traders, especially in light of Brexit and the increased economic separation between these currencies. Political and economic rifts between Great Britain and Europe have increased volatility and trading volume for this currency pair, which can be attractive to traders looking to time positions around evolving news and events.
What are some useful forex news and economic report resources?
If you’re serious about timing trades to maximize profit potential, you’ll need to stay current on news and economic reports that may directly affect the prices of your currency pairs. While these reports will be specific to individual currencies and/or the data you value most in your trading strategy, some of the most common and influential news and reporting resources include the following:
- Financial news organizations: This includes Reuters, The Wall Street Journal, MarketWatch, and other publications focused on economic and financial news.
- The U.S. trade balance report: This report offers data on the balance of imports and exports in the United States, which carries big implications for USD and other related currencies.
- Nonfarm payroll employment report: This report tabulates the jobs added or lost in the United States for a given month.
- Foreign economic reports: If you hold or are targeting positions for currencies from a particular country, identify the specific reports and release dates that had a strong historical impact on those currencies.
For a good all-around tool to track economic news around the globe, start using an economic calendar, such as MQL5. This resource will organize information and help you track the economic news that matters for your forex trading.
Why is it hard to time the forex market?
Successful forex trading is all about timing. But timing the market is much easier said than done. If you’ve traded on traditional stock markets, you understand that the strategy of trying to time trades around recessions and discounted buying opportunities almost always costs you in the long run. That’s because, while these price movements and corrections are inevitable, their timing can be unpredictable.
A good trading strategy can help you predict the timing of these trades with some accuracy, but no strategy is foolproof. A wide range of variables can affect price movement and the timing of those movements, and while some—such as economic reports from governments and reliable chart patterns—might be easier to track and trade around, others—such as breaking economic or business news or sudden changes in trader sentiments—can be tough or even impossible to predict.
As a trader, your best approach to timing is to build a trading strategy that accounts for as many variables as possible and helps you identify opportunities where you can anticipate the timing of price movements with some accuracy—even while understanding that, over the long run, you’re not going to guess it right every time.
Remember to stick with a strategy.
While timing plays a crucial role in scoring wins and profit on the forex market, discipline in executing your trading strategy is equally important in laying the foundation for long-term trading success. Each trader’s trading strategy is their own personalized blueprint to build sustained success that aligns with their respective trading goals. Your strategy is unique to you, incorporating the patterns and indicators you prefer and accounting for your own individual risk threshold when considering trading opportunities.
A successful trading strategy is built for long-term success, but that doesn’t mean it will pay off with each trade you make. The real problems start to crop up only when a run of poor returns shakes your faith in your trading strategy. Too often, traders lose their discipline and start chasing profit opportunities by overemphasizing data points, trends, and other information that isn’t corroborated through a more process-oriented trading strategy.
In other words, traders get unnerved by bad results, and they go rogue, abandoning proven trading strategies in hopes of earning back what they’ve lost. Most of the time, they only dig themselves into a deeper hole.
Forex trading success is undoubtedly built upon a foundation of commitment and execution, from education all the way through to trading strategy development. On top of that, timing also plays a key role—arguably a more important role than most people probably realize—allowing you to truly pick your moments.