One of the beauties about the Forex market is the number of hours you can trade in a day.
This means that there is plenty of time to trade after work.
And, if you ever dabbled with stocks in the past, you’re perhaps familiar with the 4 PM closing bell, which implies no more trading before dinner is served.
The currency market is a little different in that you have a full 120 Forex trading hours in a week.
And, this article will explain everything you need to know about the trading times, each trading session's market behavior and why they are essential for trading.
The 24/5 Market Advantage
The main advantage of having more trading hours is the amount of time to partake after you get done with the activity that takes up most of your time in a day.
Regardless if you own a business or employed full time, there are a few hours in a day that you can squeeze in Forex trading.
And one thing to understand about these trading sessions is that they have different moods, with each session interpreting data differently.
One session could rout a currency pair to new highs or lows, but the session later in the day could reverse that.
By knowing how all these play out, you can weigh the varying reactions and make an appropriate strategy within your scheduled trading window.
For instance, if you know how one session is particularly unsettling, especially to critical economic data releases, then you might want to remain on the sidelines till you see some calmness in the market.
Forex Trading Sessions
There are four trading sessions: Sydney, Tokyo, London, and New York trading sessions. These cities represent the trading times in the major regions of the world.
(The timings above doesn’t account for daylight savings time.)
The point of knowing these trading times, as mentioned earlier, is for you to understand how the market behaves during the day.
Typically, the first two trading sessions are the quietest, and the interlap between the closing of the London session and the opening of the New York session is the most active.
With your trading account, open the EUR/USD on an MT4 chart on an hourly timeframe and apply period separators.
With a glance, you’d be able to see where the bigger candlesticks are etched out, and that’s mostly during the London session and slants to the start of New York trading.
Generally, you can’t expect much movement with your trade if the trading window you deal with is a couple of hours within the Tokyo and Sydney trading sessions.
Conversely, the volatility within the London closing and New York opening might be a bit much for your liking.
How Opinions Shift During The Trading Hours
Opinions about news announcements or economic data changes throughout the day — in fact, the market reacts proactively to new data with apparent amnesia to reports released just a few hours ago.
As stated earlier, even a sharp price movement in a given session could be erased during another.
A recent example of this is ECB's April 10 decision to keep deposit rates at -0.4% with ECB President Mario Draghi expressing that slowdown is likely to continue throughout 2019.
Last month, the ECB also announced plans for a new stimulus, which paints a gloomier picture for the European economy and a reason for the Euro to fall even further.
The reaction, as you can see from the picture above, is a big red candlestick pushing the EUR/USD down to 1.1230, almost 50 pips from its hourly opening price.
But after two hours of decline, the New York session wiped out that move, and as of the time of writing (April 11), the Fiber trades at 1.1280 again.
The only time the market rests
It’s probably apparent to you now that the market is virtually accessible throughout the week.
Saturdays and Sundays are the exceptions (depending on which side of the world you live in) as the Forex market takes a 2-day breather.
That’s why every Sunday is the perfect time to keep abreast of the developments that occurred in the prior week.
Sundays are like your routine schedule for mapping out your approach for the next trading week.
The Best Time To Trade Forex
The best time to trade Forex, perhaps coincides with your overall strategy.
The perfect time for a strategy that profits from high volatility are possibly between 12:00 to 15:00 GMT.
Some people ascribe the Dubai time (GMT +4) as the best time to trade Forex because it captures the significant sessions at a time when it’s most convenient for working professionals to trade and that is after work.
At 7 PM in Dubai, the London market is just about to close, which leaves plenty of time for a trader within the Gulf region to participate in a fast-moving market.
However, do note that some strategies work just as well during the more tranquil Sydney and Tokyo sessions.
A simple trade that hinges on the probability of a little countermovement against the dominant direction of the day could be effective even in quieter sessions.
The key takeaways from this article:
- 1The Forex market has four major trading sessions.
- 2The most active session is during the overlap of the London closing and New York opening.
- 3The market reacts quickly to new data and is somewhat unmindful of the events that transpired even just a few hours ago.
- 4You can trade the forex market 24 hours a day and five times a week.
- 5There is no best place or time to trade currencies; there are only strategies that work best during a particular time within the day.