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Best Time to Trade Forex by Market (& Overlap in Trading Times)

Monday, July 12, 2021 5:43 PM GMT
Trading Forex on the market can be a thrilling and exciting experience for any trader, but to be a success you’ll need to get the timings right, know which market hours are the most suitable volatility, condition wise for each pair and when do they close. So what are the best times for forex trading? 
This is referring to the different time zones across the financial world, whether you’re in New York, London, Asia or Sydney. Some experts believe that Forex markets might behave differently right at the beginning or end of a calendar month. The logic behind this belief is that big investment institutions often decide to change their investments at these times. Let's dig in and find out the best times to trade forex.

 

Table of Contents

 

Forex Market Hours by Trading Market
Overlaps in Trading Times per Trading Market
How Does the Time You Trade Affect Your Results
Best Time to Trade Forex by Each Market’s Trading Session


Forex Market-Hours-by-Trading-Market

Seeing as the world isn’t flat, we have several times of the day when more than one market is open at the same time. These overlapping times usually provide the best degree of liquidity in certain currency pairs, similarly to wider pip range movements. This tends to create better times to trade, theoretically at least. Since more liquidity and a higher volume of trades will often be more beneficial to the speculative forex trader, certain times when trading is heavier in individual currency pairs can give a trader the edge needed to be profitable. This can be especially true for traders using short term strategies like scalping or day trading.

Source: Visit London

Market #1: London
London (opens 8 am - 4 pm GMT), dominates the global currency markets. The session has a heavy impact on currency fluctuations given the Bank of England’s influence and the importance of the GBP.
Market #2: New York
New York (opens 1 pm - 10 pm GMT), is second only to London in its importance as a global financial centre. It is closely monitored by foreign investors far and wide, given that the US dollar is involved in the vast majority of all currency trades. Movements in the stock market can also affect the dollar.
Market #3: Sydney
The worldwide trading day begins in Sydney (opens 10 pm - 7 am GMT) Although it is the smallest of the major markets, it experiences a lot of the early action when the markets reopen from the weekend break.
Market #4: Tokyo
Tokyo (opens 12 am - 9 am GMT), makes up the bulk of Asian trading, with the Japanese Yen seeing a good amount of action. JPY currency pairs, especially USD/JPY, should be closely watched when the Tokyo market is the only one open, as the Bank of Japan has a strong influence on the market.
It’s important to note that due to the different time zones of the markets, there will be crucial overlaps in trading times so this next section will have a look at the best time of the day to trade.
 

Overlaps in Trading Times per Trading Market

As you will no doubt notice from the opening and closing times of the different Forex sessions, there are periods of the day where two sessions are open at the same time.
These overlaps represent the busiest times of day in terms of Forex transactions, simply because there are more market participants active. Traders can expect both higher volatility and liquidity during these Forex market hours, either through the European session or Asian session - making them among the best times of day to trade.
Currency pairs display varying levels of activity throughout the trading day, based on who is active in the market at any given time. Being aware of the different Forex sessions gives us an idea of what time of day Forex pairs are most active.

Source: New York Forex Institute

Overlaps for London

This overlap is the key forex trading period when both the New York and London major forex trading centres are open for business. Trading in all the European currencies is heaviest during this period and offers the most liquidity for currency pairs involving the Euro, Pound Sterling and Swiss Franc. Such especially liquid overlapping times would include the important period when the major trading centres of New York and London are both open for business. Frankfurt is also open from 8 am until 10:00 am GMT. Also, if you are trading the EUR/USD, GBP/USD or USD/CHF currency pairs, then the market for these currency pairs would likely be the most active during that period because they represent the major currency pairs involving the United States and European countries.

Overlaps for Sydney

This is the period during which the New Zealand and Australian markets overlap with the Asian markets of Tokyo. This period tends to have the most liquidity for the Australian and New Zealand Dollars and their crosses. Trading in Australia and New Zealand overlaps with Tokyo, this makes the overlap period especially liquid as Australia, New Zealand, Tokyo, Singapore and Hong Kong are all open. This overlapping time frame often sees especially active trading in the AUD/USD, AUD/JPY, EUR/AUD, NZD/USD, AUD/NZD and NZD/JPY currency pairs.

Overlaps for New York

The ‘overlap’ is when the London and US forex sessions overlap each other. These are the two largest market centres in the world, and during these four hours – large and fast moves can be seen during the overlap as a large amount of liquidity enters the market.

Overlaps for Tokyo

Tokyo overlaps with London respectively. This period usually offers the most liquidity for the Japanese Yen, as well as the European Yen crosses. Another good time to trade to take advantage of several different markets being open simultaneously as Asian and European markets overlap at different points. The Tokyo forex market continues trading throughout this overlap period and can see particularly active trading in the USD/JPY, EUR/JPY, GBP/JPY and CHF/JPY currency pairs.

 

How Does the Time You Trade Affects Your Results

Source: Australia.com

Way #1: Overseas Market/Economy

The New York Stock Exchange opens for trading at 9:30 am ET daily. However, before the opening trade, equity markets in Asia and Europe have already finished their trading day. The purpose is, if certain stocks or sectors have had a very good or bad day in those markets, the sentiment could have sway on trading here within the U.S.
For example, a pessimistic outlook for technology companies in Asia or pharmaceutical companies in Europe could easily spill over into U.S. trading and cause American technology and pharmaceutical stocks to require a nosedive. This, in turn, contains a major adverse impact on all of the most important indexes. If you see major negative activity during a foreign market that impacts your sector, it'd be best to attend until the dust settles before you enter the position. This may often prevent some money right from the beginning.

Way #2: Economic Data

If there's talk that the US may revalue its currency, then it's going to cause shares of exporters to the US to trade higher. Incidentally, interest rate changes may cause funds to flow into or out of certain markets. An example of this would be if interest rates within the UK rise, investors in this market may flee for better opportunities. Often, US stocks will reap the benefit.
In choosing when to invest, you should be aware of any economic news that is or will be coming out around the time you go to enter your position. If a highly anticipated economic release is set to come out which will result in high volatility, it might be best to wait for its release instead of jumping in beforehand. It’s important to note that In choosing when to invest, you should be aware of any economic news that will be coming out around the time you go to enter your position. 

Way #3: Futures Data

Although an individual could be wanting to buy or sell stock at the open at a favourable price, futures data will give the individual a far better idea of whether that will be possible. Index futures cover the most important market indexes. They begin trading before the stock exchange and are a really good indicator of what the securities market opening will appear as if. The explanation for this can be that index futures prices are closely linked with the particular level of the Dow Jones Industrial Average.

Way #4: Buying at the Open

In short, investors should check to determine if futures contracts are trading higher or lower in pre-market trading. This may give them a much better feel for where the index they're tracking could be headed "after the open." you may usually find CNBC or other market outlets talking about the movement of DJIA or S&P 500 futures before they open.
Before the open, some of the bellwether stocks report earnings or disseminate news. This will cause some investors to rotate money in or out of a sector at the primary chance they get. Now let’s take a look at the best time to trade Forex for each trading session.
 

Best Time to Trade Forex by Each Market’s Trading Session

The best time of day to trade forex is when the market is most active – this is when you’ll get the narrowest spreads and the best chance of executing a trade at your desired levels, having these times is essential to any forex trading strategy. The forex market is usually most active when the trading hours market hours overlap between sessions, as this is when the number of traders buying and selling each currency increases.

 

London session (opens 8 am - 4 pm GMT)

Most traders start trading in the London session. London has always been at the centre of trade, thanks to its strategic location. Today, London benefits from its time zone. London’s morning overlaps with late trading in Asia and London’s afternoon overlaps with New York City. It’s no wonder that it is considered the forex capital of the world with thousands of folks making transactions every single minute. About 43 per cent of all forex transactions happen in London. Some traders also refer to the London session as the European trading session.

Sydney session (opens 10 pm - 7 am GMT)

The best advantage of living in Australia is that the London Forex Trading Session starts in the afternoon when you are most likely at home which means you can spend at least 3-5 hours each day after work to trade the forex market.

New York session (opens 1 pm - 10 pm GMT)

The New York session is the last trading window to close on the 24-hour forex trading clock, and it often experiences high trading volume, as traders seek to squeeze the last bit of profit out of that trading session’s news announcements. Many USD crosses experience their highest trading volumes during the New York session, and this represents a considerable slice of the forex market with USD included on one side of 44.15 per cent of all daily forex transactions. 

Source: Tokyo Stock Exchange

Tokyo session (opens 12 am - 9 am GMT)

The Tokyo session enjoys a large overlap with the Sydney session, well within the Eastern Standard Time, the two centres being open for five hours simultaneously between (7 pm - 12 pm EST). Pairs such as USD/JPY or EUR/JPY are popular during the Tokyo session. There is also a lot of liquidity and volatility in the AUD/JPY currency pair during the crossover between the Sydney and Tokyo session, which is one of the most volatile currency pairs on the market and the second most traded JPY cross behind USD/JPY.

 

Now Over to You

That pretty much sums up our guide for the best times to trading forex on the markets of the world. Now it’s your time to shine and start your Forex trading journey with ZuluTrade. Create an account and Make sure to look at our features to give you the extra edge and give you the best trading opportunity within the five day week. We hope you enjoyed this guide and have it informative.  From all of us at ZuluTrade, we wish you all a smooth trading journey.

 

Disclaimer: The views expressed do not constitute investment or any other advice/recommendation/suggestion and are subject to change. Reliance upon information in this material is at the sole discretion of the reader. Opinions expressed in this article do not represent the opinion of ZuluTrade Social Trading Platform and do not constitute an offer or invitation to anyone to invest or trade. Every metric and the statistical number is a result of a past performance which does not constitute a promise or a certainty for a future one.



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