What is the best time to trade forex

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Timing is one of the keys to trading successfully on the foreign exchange (forex) markets. The time of day you trade will be affected by available liquidity, demand along with other factors such as economic or political news events. For this reason, it is a good idea to factor in which markets are open when you trade.

There are four main forex markets, each open at a different time which means a market is open somewhere throughout the work week.

On this page, we cover the forex markets and the hours they are open and look at considerations to keep in mind when deciding the best time to trade forex.

With that said, let's go over:

Overview of forex market hours

The Forex markets are global, meaning there will always be a Forex market open and operating somewhere during the work week. There are four markets - Sydney, Tokyo, London and New York, each with their own operating hours. Since all markets are in different time zones, when one market closes, another market opens and in some cases these markets overlap meaning they are open at the same time.

Here are the opening hours of each of the forex sessions in universal coordinated (UTC) time:

This mix of opening hours has many implications, some of which are more significant than others. New York for example sees the highest liquidity followed by London, these are also the busiest markets. Periods where forex market sessions overlap lead create more movement and thus more opportunities.

Sydney

The Sydney forex trading session is the earliest session in UTC time, meaning it's recognised as the earliest forex market open. Australia is where the forex trading day officially starts.

Compared with the other three biggest markets, the Sydney market is the quietest. The market opening on UTC 22:00 Sunday night (8am in Sydney) normally sees plenty of movement as the global forex market is opening for the working week.

The Sydney opening time normally sees both individual forex traders and large institutions regroup after the weekend pause. There is no pre-market or after-hours trading in the Sydney market

Tokyo

Two hours after the Sydney markets open and traders regroup, the Tokyo market opens. This is the largest forex market in Asia and where most of Asia's forex trading takes place. It opens ahead of Singapore and Hong Kong, sending them signals.

The early hours of the Tokyo forex trading session often see high volume orders in:

The middle hours when the Tokyo market is the only one open are a good time to watch the performance of the Japanese Yen against other major currencies. The Bank of Japan has a large influence over forex markets.

London

London operates on UTC time and happens to dominate the global forex markets. It often makes up 41 per cent to 45 per cent of global currency trading volume. If there were a heart of global finance, it would be London.

In addition to regular trading hours (08:00 to 16:30 local time), there are extended trading hours until 17:15. There are also early trading hours from 05:05 until ten minutes before the market opens.

The Bank of England has one of the largest effects on global currency exchange rates of any central bank. This means many forex trends start in London, especially with GBP trading pairs. Technical traders keep a close eye on early movements in the London market.

New York

Last but certainly not least, there is the New York session. This session often accounts for just less than 20 per cent of global forex turnover. However, the reliance on the US Dollar in global trade adds to the significance of early movements in the New York session.

The New York forex session coincides with the hours of the New York Stock Exchange (NYSE). The early movements of the NYSE can have a huge impact on USD trading pairs. Forex traders who do not invest in stocks should still pay attention to the strong influence the NYSE has on the Dollar. Many MT4 brokers offer trading tools and indicators specifically designed to help traders analyse and capitalise on the the market movements during the New York session.

Forex market timing vs the stock market

Each stock exchange is limited to the business hours of its locality. For example, the NYSE is only open during business American Eastern Standard Time (EST) hours. Transactions involving stocks on the NYSE are limited to these hours, plus times when other exchanges support the same stocks.

Unlike stocks listed on one exchange, forex pairs are available and change throughout the business week. With the exception of the weekend pause, forex pairs are always being traded.

This makes Forex timing more complex, as every Forex market has a unique effect on rates. Paying attention to the most significant times of the forex cycle can help.

Forex trading by time of day

Certain times of every 24-hour cycle produce oversized results on exchange rates. This is especially true during the times when major market sessions overlap. Those times of the day produce the highest transaction volumes and liquidity. This leads to larger movements that present special risks and opportunities.

Sydney-Tokyo forex trading session overlaps

After being open for two hours, the Tokyo session begins and overlaps with the Sydney session for the next 7 hours. Compared with the overlapping sessions later in the day, this 7-hour stretch is far less volatile. But you can still expect more significant pip movements, particularly in EUR/JPY pairs.

Tokyo-London forex trading session overlaps

For a more brief one-hour period, the London session is opening up while the Tokyo session is winding down. This is still a relatively quiet time as people are still asleep in New York. But you can observe pip change trends which have opportunities to present themselves. In particular, GBP/JPY rates see the highest average pip movements.

London-New York forex trading session overlaps

This is by far the most significant forex session overlap of the day. The two largest forex exchanges in the two largest financial centres interact to make the most significant impacts.

So, in terms of raw earning potential (and risk), the early afternoon in London is the best time to trade forex pairs.

Factors influencing forex trading times

Market sessions should not be over-relied upon as signals for the best time to trade. There are other indicators to look out for that may make one time or another better for placing an order.

Stock exchange movements

Capital markets, especially stock exchanges, have a significant effect on currency values. They serve as indicators of economic health, among other things. Significantly, they are also when economic data and news are being released and consumed at the highest volumes.

Rallies, sell-offs, bear markets, and bull markets have significant impacts on all aspects of global economic life.

By extension, changes in commodities markets also correlate with currency exchange rate movements. This is especially true for forex pairs where one of the national currencies is closely tied to a single commodity or few of them.

Market news

Of course, international trade and market news affects foreign exchange rates. The release of such news, whether anticipated or not, will affect foreign exchange rates.

Economic indicators

Economic news, especially the release of new economic data, affects the forex market. Economic reports play a large role in professional forex traders' practices. GDP statistics and other indicators of national economic strength contribute to perceptions of the strength of national currencies.

Other news

Political news and significant weather events may also have an impact on currencies. The causation may be indirect, but professional forex traders pay attention to the connections between currency and other factors.

Tips and strategies

5-3-1 Strategy

The 5-3-1 strategy can help new traders who want to establish a plan that matches their own timing without being overwhelmed by:

The "5" part means that you should start by focusing on only 5 trading pairs. The "3" part means that you should employ no more than 3 specific analytical strategies. This helps focus your learning and hone a specific, restricted skillset that does not overwhelm you.

Lastly, the "1" part means that you should only trade at one time, every day.

For a beginner, these rules of thumb can help you stay focused on the fundamentals that you need. The simple fact of the matter is that timing matters a lot in forex. You probably aren't going to be able to make the right orders unless you take the time needed to understand pip movements as they correspond to different times of the day.

As a beginner, it is suggested that you do not choose the riskiest times to make your trades. It may seem pertinent to follow high-impact news events and try to benefit from them. But without experience, you may make mistakes.

For similar reasons, it is prudent to avoid ordering too many lots during the most volatile hours until you have more experience. The best Forex brokers offer a free demo account to practice trading Forex, this is a good way to test your trading strategies without using any cash. Other brokers have micro lot trading, which allows you to practice trading with very small amounts of your own cash.

The foreign exchange markets are timed in a different way than the markets for other assets. But like other assets, the timing of forex orders matters a lot.

Professionals pay close attention to the time of day, forex market overlaps, and emerging news and data. These factors are crucial in determining not only the right currency pairs, but the right order sizes, timing, and stop-loss.

For beginners, it makes more sense to be consistent with order timing. Forex trading is complicated, so it pays to avoid being overwhelmed. For them, the 5-3-1 rule offers a good starting point.

Best time to trade forex FAQs

Forex trading starts every Sunday evening at 10 pm UTC in Sydney (8 am local time). From this time until Friday night, at least one Forex market in the world is open.

The best times to trade forex depend on your strategy. As a beginner, the 5-3-1 rule is a good rule of thumb. It states that beginners should try to make their orders at the same time of the day, every day.

Forex trading in Sydney starts at 8am on Monday.

To trade forex, you need to sign I with a Forex broker, since you are in Australia, it is essential to choose a broker regulated by the Australian Securities and Investments Commission (ASIC). The best Forex brokers in Australia are ASIC-regulated, offer a large range of currency pairs to trade, good trading platforms and accessible customer support.

Disclaimer: Forex trading carries a high risk and may not be suitable for all investors. Leverage can increase both profits and losses. Consider your investment objectives and risk tolerance before trading. This content is for informational purposes only and is not financial advice. Seek guidance from a qualified financial services advisor before making any trading decisions.