what is the best time to trade forex

The old adage traditionally used across London trading floors ‘Sell in May and go away’ still holds its own, according to an analysis by S&P Indices. It is the last four months of the year that contribute most to full year returns. The theory behind this maxim is that the summer months are characterized by sluggish performance or a loss. The preceding Jan-May period averages out to be 3%, with the bulk of the gains falling in the last four months of the year (Sept-Jan). The last four months remain the most important for contributing to full year returns, meaning that even after experiencing a poorly performing summer there is still the chance to improve returns. When two major financial centers are open, the number of traders actively buying and selling a given currency greatly increases.

The aim should be to trade forex when the markets are most active as it lowers the spread. Also, the worst timing for trading is between the beginning of the Sydney session and the end of the New York session. According to a Citibank study, 30% of traders in the retail business break even better, and 84% believe in making money in the forex market. Moreover, currency trades consist of 1000 to 1 and other high average rates. Moreover, Consumer Price Index (CPI), consumer confidence, trade deficits, and consumer consumption are a few factors that have steady, scheduled releases and move the market.

While this ratio offers tantalizing profit opportunities, it comes with an investor’s risk of losing an entire investment in a single trade. There can be exceptions, and the expected trading volume is based on the assumption that no major news will come to light. Political or military crises that develop during otherwise slow trading hours could potentially spike volatility and trading volume. In general, https://www.forexbox.info/ the more economic growth a country produces, the more positive the economy is seen by international investors. Investment capital tends to flow to the countries that are believed to have good growth prospects and subsequently, good investment opportunities, which leads the country’s exchange strengthening. Sydney, Australia (open 5 p.m. to 2 a.m.) is where the trading day officially begins.

what is the best time to trade forex

Movements in the New York Stock Exchange (NYSE) can have an immediate and powerful effect on the dollar. When companies merge, and acquisitions are finalized, the dollar can gain or lose value instantly. Just after the second holiday period in December, there is a pick of trading activity that lasts from January to May.

Consider making practice trades on a demo platform before you start risking your real money. Forex trading is the trading of different currencies to make money on changes in currencies’ values relative to one another. Most of this trading occurs via electronic platforms or over the phone rather than on exchanges.

Overlaps in Forex Trading Times

Meetings Concerning Monetary PolicyTraders should keep an eye on the timings of meetings that can affect the monetary policies of a country. Spreads of concerned pairs are generally higher around the meetings which can possibly affect the economic activities of the country. The first overlap happens in the morning for European traders (in the evening for Asian traders) from 8 am GMT to 9 am GMT (5 pm JST to 6 pm JST in Tokyo).

  1. Higher interest rates will attract foreign investments and will have a major impact on the prices of currency pairs.
  2. They can trade as little or as often as they want, during their business hours, after work or even in the middle of the night.However, there are drawbacks to having the market being open 24-7.
  3. Therefore, the training market has a possibility of experiencing a ripple effect.
  4. The prices of currency pairs move differently during different sessions.

Your ability to make money trading forex depends on the proportion of trades you profit from and the size of your profits, not necessarily the time you spend. The reason why the best months to trade occur just after summer, from September to December, is because these months represent a surge of trading activity after the summer holiday lull. Any holiday period represents drying up the trading volume, and the months following these holidays represent a refreshing return to trading, like rain after a drought. A currency “fixing” is a set time each day when the prices of currencies for commercial transactions are set, or fixed. The best time for you to trade forex will depend on which currency pair you’re looking to trade. You usually want to avoid trading when only one trading session is open and instead, wait for trading sessions to overlap.

The Best Hours for Forex Trading

For example, AUD/JPY will experience a higher trading volume when both Sydney and Tokyo sessions are open. And EUR/USD will experience a higher trading volume when both London and New York sessions are open. If you are located outside of the Eastern Standard Time Zone, the best time to trade forex in the US is shown in the table below. OANDA and Forex.com are both top choices for tight spreads and selection of trading platforms, while IG is a great option for beginner traders. Daily trading volume has seen similar growth, increasing from USD 6.6 trillion per day in 2019 to USD 7.5 trillion in 2022.

We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools. We’re also a community of traders that support each other on our daily trading journey. Most https://www.day-trading.info/ of the trading activity for a specific currency pair will occur when the trading sessions of the individual currencies overlap. Forex markets operate 24/5 with each major trading session opening at a different time.

what is the best time to trade forex

And this is why you should focus your energy during specific trading sessions. In addition to low spreads, user-friendly trading platforms, and research tools, US traders should look for a forex brokers regulated by the Commodity Futures Trading Commission (CFTC). Based on our research at CompareForexBrokers, three of the best brokers with CFTC regulation for US forex traders are OANDA, Forex.com, and IG. To learn more about forex market cap and trading volume, you can read our forex trading statistics page here. If traders can gain an understanding of the market hours and set appropriate goals, they will have a much stronger chance of realizing profits within a workable schedule. Research data from the S&P indicates that the summer months provide weak returns for most financial markets for many countries in Europe.

Most beginners in the forex market often wonder why can’t they trade anytime they want forex market remains active 24 hours a day. The truth is you can trade on any currency pair at any time you want (on weekdays) but there will be consequences while trading at odd hours. As mentioned earlier, the London session has the highest liquidity because many multinational banks have banks in England’s capital. Therefore, traders undergo a similar experience during the New York session. Besides this, the best timings also vary on the chosen currency and the currency pair. Therefore, traders need to find the best times based on the local working hours.

The Forex Markets Hours of Operation

The first session of the week, and of every trading day, is the Asian session. Forex market hours operate 24 hours a day, five days a week across four major forex trading sessions. This forex trading hours guide is designed to educate US traders about forex market hours along with factors that affect trading activity and liquidity. They watch various economic calendars and trade voraciously https://www.forex-world.net/ on every release of data, viewing the 24-hours-a-day, five-days-a-week foreign exchange market as a convenient way to trade all day long. Not only can this strategy deplete a trader’s reserves quickly, but it can burn out even the most persistent trader. It is important to take advantage of market overlaps and keep a close eye on news releases when setting up a trading schedule.

Are stock markets and forex markets open at the same time?

No, It is not recommended to trade forex at night because most capital markets and business activities remain inactive during the night. This leads to less exchange of currencies and causes liquidity issues for forex traders. The spreads on forex pairs will be very high during the night and traders are more likely to face losses. Traders can make more informed decisions by understanding the spread and currency pair movements during trading sessions. The first impression might seem complex; however, in due time, understanding would become more accessible. Moreover, a high volatility session may not often prove profitable for traders.

Frequently Asked Questions about Forex Market Hours

Such data release causes sudden widening of the spreads and trading at such times won’t be feasible even during the peak trading hours on active sessions. Experienced traders take advantage of news releases to predict the price movement in currency pairs. Following are the major events that a forex trader should look out for and comprehend their effect on the prices of currency pairs. Other News Many other news releases like unemployment data, trade deficit or surplus, major foreign investment, etc can also create significant volatility in the market leading to a widening of spreads in currency pairs.

This is when forex markets experience the highest trading volume, offering more potential for profitable trading strategies. According to BIS, the trading volume of ZAR currency pairs is 14% in South Africa and 50% in the UK. The foreign exchange market, or forex, is a global decentralized market. Optimal times to trade the forex market are when the market is most active, which is often when the trading hours of major regions overlap. The forex trading sessions are named after major financial centers and are loosely based on the local “work day” of traders working in those cities.

Outside of the New York trading session in the US, the London session closes at 12pm EST, Tokyo 4am EST, and Sydney 2am EST. The London session is the busiest and most volatile trading session as it overlaps with both Tokyo and New York. The New York trading session is the second busiest due to it overlapping with the London session. Forex traders should always open any trading position with targets of take profit and stop loss limits. If the prices hit take profit limits the position is automatically closed.

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