Traders Blog

The Best Times to Trade Forex

What’s the best time of day to trade Forex?

Timing is everything – in life, in business, in love. Being prepared to strike when the opportunity presents itself is essentially the definition of success. Is there a way to ensure that this happens? Yes. By doing everything in your power to be as ready as possible for the right moment.

This mindset perfectly applies to Forex trading. Why? Because Forex is as time sensitive as an industry can get. News on business, politics, finance and trade, change the valuation of currencies in split seconds. What that means is that being ready to act upon such volatile instruments is paramount for achieving any kind of success.

How do you stay ready and what are the secrets for finding the best times to trade Forex? The answer is… overlap. Yes, overlap. Let us explain.

Normal market hours

When we refer to Forex trading, we mainly talk about four main markets: Tokyo, London, New York and Sydney. These markets obviously operate at different times due to geography and the difference in time zones. Here’s a breakdown of their operating hours in Eastern Standard Time (EST):

  • New York (open 8 a.m. to 5 p.m.)
  • Tokyo (open 7 p.m. to 4 a.m.)
  • Sydney (open 5 p.m. to 2 a.m.)
  • London (open 3 a.m. to noon)

Even though we’ve all tried to stay awake for the full 24 hours of the day at least once in our lives, let’s agree that this is not the most effective way to keep up with the market. What can be done though, is to strategically plan your trading activity at times where these market hours overlap. The idea is to be involved in trades during the hours that more than one market is open. Think of it as catching the sunrise, or the sunset only with the prospect of being engaged in meaningful trades. Let’s have a look at these overlaps in more detail.

Tokyo/London Overlap
(3am – 4am)

This is viewed as the lowest impact/lowest traffic overlap session of the lot. The reason is twofold. Firstly, the obvious absence of US-based traders (probably sleeping) from the mix, takes out a lot of steam from the equation. Secondly, the simple fact that overlap only lasts for an hour, it gives little to no time for changes to have an effect on currency pairs. When you throw in the fact that this is the middle of the night for most European-based traders, it makes it an overall challenging time to trade.

London/New York Overlap
(8am – noon)

This is the exact opposite to the Tokyo/London overlap session. This is the time where the consensus two biggest markets are live and kicking at the same time. This is where Forex trading lives and breathes. If you could choose one overlap session to follow and trade, this is the one. 70% of the entire daily volume happens during this session with trends from the European session, taking full effect and carrying their impact in this one. Moreover, this session is usually dominated by the release of major reports, reviews and announcements from US and Canadian financial and political governing bodies. This flow of news and information creates the ideal trading environment as volatility is at its highest.

Sydney/Tokyo Overlap
(2am – 4am)

If Tokyo/London is the one to avoid and London/New York is the one to aim for, Sydney/Tokyo is a happy medium. The EUR/JPY and the AUD/JPY are the currency pairs to keep an eye for in this session as the absence of the greenback and the US market in general limits cuts trading choices down.

There you have it. A brief rundown of how to stay on top of the trading game. Plan, schedule and set your alarm clocks according to the overlap sessions and you’re ready to go.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.

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