Best Time to Trade Currencies

One of the greatest features of the foreign exchange market is that it is open 24 hours, five days every week (closed Saturday and Sunday). However, a trader can buy and sell currencies at any point when a single market is open. As we will discuss later in this article, it is not always advantageous to trade any given pair during any give time frame. Certain currency pairs will be more or less volatile during certain times of the day.

In this Article We Will Discuss the Following:

  1. Forex Market Hours;
  2. Trading Sessions;
  3. Currency Market Volatility.

Forex Market Hours

Example: a trader in North America can trade on Sunday night since the Australian market would be open. It might not be beneficial, though, because the market may have low liquidity during that time and could experience large spikes in prices. Low market liquidity could mean more price volatility as there is an opportunity for the Agents of the Fed to sweep the market and buy or sell all pending orders.

The trading sessions of the Forex market can be divided into three major categories; the first being the Asian session which covers the Wellington, Sydney and Tokyo sessions. This continues into the start of the second session which is the European/London session. The European/London session also overlaps into the third and final session of the day which is the US/New York session.

A general breakdown of the trading sessions/times is given below (EST):

New York is open from 8:00 am to 5:00 pm
Sydney is open from 5:00 pm to 2:00 am
Tokyo is open from 7:00 pm to 4:00 am
London is open from 3:00 am to 12:00 noon

Important Times in the Forex Market (EST)

Australia Open/New York Close – 5pm
Tokyo Open – 7pm
Singapore Open – 9pm
Frankfurt/London Open – (2am- 3am)
New York Open – 8am
London Close – 12pm

fx market hours

Forex Trading Sessions

The first session of the day is technically the Asian session which is the lightest in terms of trading volume and activity. However, as of late the importance of the Asian economies have been growing and have started to create bi-lateral trade deals to transact in their own currencies as opposed to the world reserve currency (US Dollar). This will definitely affect the Forex market over time as this ultimately creates added demand for Asian and European currencies while the US Dollar loses its dominance in global trade. The main currencies that operate during the Asian session are the Japanese Yen, Aussie Dollar, New Zealand Dollar, Hong Kong Dollar, and the Chinese Yuan. These currencies make up the domestic economies that are used in bank wire transfer, exchanges, etc. The most traded currency pairs that are traded during this session are the AUD/USD, AUD/JPY, AUD/NZD, USD/JPY, NZD/JPY and NZD/USD.

Next is the European session which has the greatest volume in terms of trading: the London session alone constitutes over 38% of all trading activity throughout the world. Trading the London open ensures that you are trading in highly liquid markets. The main currencies that operate during these hours are the Euro, British Pound, Swiss Franc, and the Norwegian Krone. The most traded currency pairs that are traded during this session are the EUR/USD, EUR/JPY, GBP/USD, EUR/GBP and EUR/CHF.

The North American session is the final session of the day and the constituting over 17% of all trading activity throughout the world. The main currencies that operate during these hours are the Canadian Dollar and US Dollar. The most traded currency pairs that are traded during this session are the EUR/USD, USD/CAD, EUR/CAD, AUD/USD and JPY/USD.

Here is the current Forex market status:

Currency Market Volatility

Volatility is the life blood of Forex trading. Without volatility there would be no profit and no Forex traders as we know them today. The free-floating exchange rates provides the variations in price that are needed for Forex traders to buy/sell in pursuit of profit. There are many reasons why volatility is created in the Forex market but to name a few, there are economic news announcements, commodity prices, a change in a country’s monetary policy, war etc.

Since economic-related press releases are relevant to a specific region, when announced they will affect the currency pairs that are related to the news piece. For instance, US manufacturing or US CPI index numbers will primarily affect the USD. This is an important concept to keep in mind when trading right before a major news announcement. This is also true with commodity prices in countries that depend on the price of commodities for their economy. For instance, a drop in the price of oil weakens the economies of oil producing nations such as Canada and hence the Canadian Dollar will be affected. When a country decides to increase the interest rate this will make borrowing costs higher and the availability for banks to lend money out to customers much more difficult. The result of these measures is deflationary and increases the value of the country’s currency as the currency becomes worth more. If a country is in war, the result will likely be hyper-inflationary as we saw in Germany during the 1920’s as the government printed money to pay for the war and no investors wanted to purchase its debt. Volatility is created by a change in market sentiment: if traders’ and investors’ mood and sentiment change suddenly by an major event this will likely drive up the volume in the market and push prices either up or down. The removal of a currency peg is also an extreme forex event where the market moves 100’s or even thousands of pips in a flash. Case in point, when the Swiss National Bank in early 2015 removed the peg from the CHF to the Euro, caused shockwaves in the forex market.

It should also be noted that trading strategies can be more or less successful depending on the session during which you are trading. Trading the EUR/USD  during the Euro session will be more volatile than during the Asian session. In the end, volatility is good. The more volatility there is, the more profit we can make as traders. During the overlap of the European and American sessions, we can observe a greatly heightened activity. During this period, the price movement can be very volatile with rapid movement in both directions, especially at the very start of the overlaps, and so caution is advised when looking to trade. Nevertheless, the London session is where you will most probably experience the greatest volatility in the markets.

Below is a table of the London session pip ranges of the major currency pairs that were traded during the month of May 2012. Note, that these are just averages and not expected to be used in your own trading.

PairLondon Session

Characteristics of the London session

  • Highest liquid market which leads to lower transaction costs and spreads;
  • Usually the most volatile session out of the three;
  • Many trends are started in the London session.

However, many people will not be able to trade the London session as the time of day is simply not convenient for them. Traders in North America with day jobs will probably want to trade the Asian markets as it is most convenient for them. Or if they get up early before work they can trade the London session.

In the final analysis, it is during the London session that we may see the highest liquidity and volatility, but you will need to test your system to ensure you are making consistent profit during these times. If not, perhaps another session will work better for you. If you are not flexible with your trading hours and cannot trade the London session, I would not worry as there are profitable systems during any session. In our Advanced Members Course we introduce a method that will work in any trading session.

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