The reason you are reading this article is probably one of the following:
- you are just getting started in the Forex market
- you have recently started trading, but haven’t figured out the best time to trade
- you realized that trading all day long is not the best way to make money
Whatever your reason is, you’ve definitely come to the right place. To figure out the best time for your trading, we need to know exactly what you are trading.
Trading sessions (and the best for you)
Forex trading sessions can be divided into four major groups:
- North American (New York)
- Asian (Tokyo)
- European (London)
- Pacific (Sydney)
At the beginning of the session, the currencies are gaining momentum:
- During the European session, all pairs containing the euro and the pound sterling are active, with EUR/USD, EUR/GBP and EUR/CHF demonstrating the largest trading volumes
- In the American session, the pairs containing the US dollar are on the rise: EUR/USD, USD/CHF and USD/JPY. During this time, the Canadian dollar, USD/CAD comes to life.
- In the Pacific and Asian session, the pairs containing the Japanese yen and NZD/ USD are especially volatile.
Sessions in practice
Let’s say you are trading the Yen, USD/JPY. How to apply this knowledge about trading sessions in practice? Let’s see:
- First, determine the time when your currency pair is most active. USD/JPY is trending strongly during the American and Asian sessions. During this time, stock traders are at work and are actively trading. Our local time is GMT+3, so for us, the most active time for the pair is from 4 pm to midnight and from 3 am to 11 am.
- USD/JPY pauses when America and Tokyo rest: from 1 am to 3 am and from 12 to 3 pm.
Keep in mind, that traders in New York and Tokyo need some time off during the day too: they all leave for a lunch break😉 So from 8 pm to 9 pm and from 7 am to 8 am, you are likely to observe a sideways movement in the USD/JPY.
When trading sessions concur, their currencies are most active. In the middle of the session, traders have lunch – so trading volumes are falling. At the end of the session, traders close positions: trading volumes are extremely low, currencies enter the “sideways mode”.
Information about the sessions is essential for scalpers and intraday traders:
The best trading time to match your trading style
Traders are divided into 4 trading styles, according to their trading strategy:
- Intraday traders
- Position traders
- Long-term traders
Let’s start with the latter. If you like to hold trades for a day, a week, or a month, you don’t need to follow sessions and trading schedules. All you need to do before opening your trade is to make sure that there is no high-impact news an hour or two before the entry.
But for scalpers and intraday traders, sessions are part of the trading system. You don’t trade with the trend when the session runs out of steam and the price starts moving sideways. And you shouldn’t wait for a sideways trend when the price is about to start trending. So:
When the session opens, wait for a trend. When the session is running out – get ready for the range movement.
The best time to for the range movement
The sideways trend most often begins:
- At the end of the New York session and at the beginning of the Pacific session, from 11 pm to 2 am.
- At the end of the Tokyo session and at the beginning of the European session, from 9 am to 11 am.
P.S. Account for the time inside the session when traders go out for lunch.
The best time to catch the trend:
- The beginning of any session.
- Intersection of sessions.
For the currency market, the most active time is when New York and London exchanges are open, from 4pm to 7pm.
When you SHOULD NOT trade
It’s funny how everyone is looking for the best time to trade. And few people think when it’s better to avoid trading and keep off the market. It’s highly undesirable that you enter the market on:
- Friday. By the end of the week, we all get tired and tend to make illogical decisions. Traders working for major banks are no exception.
- Holidays. You might be hoping for a spike in prices after the holidays, but the market likes to make adjustments. And they are usually not in your favor.
- News. We are going to offer you some obvious advice, but no one will listen to it anyway: do not trade the news. Your deposit can significantly suffer if you decide to risk it by entering the market during the news release.
We’ve talked a lot about trading sessions and the best trading time for your style. Let’s sum up the main points:
- You don’t need sessions if you prefer position trading or trade over the long term.
- Your best session is when your currency pair is being traded. If you like trading the yen, you should trade when Tokyo and North American sessions are open. If you trade the Euro, do it at the London and New York openings.
- Find the best time for your style. If you trade the trend, then wait for the intersection of the sessions. If you prefer trading during the flat, enter the market at the end of the session when the volumes are at zero.
We’ve covered everything you need to know about the best trading time. Now it’s your turn: open an account, fund it, and apply your knowledge to practice. We wish you the best of luck!