What is Forex and the Different Ways to Trade Forex ?
How Forex Works and What are Pips and Lot in Forex?
How to Start Forex Trading and Best Times of Day to Trade Forex?
Forex Market Structure, Forex Players and Forex History
Why Trade Forex? Advantages of Forex Trading, Forex vs. Stocks vs. Futures
What is Margin Trading, Used Margin, Free Margin, Balance, Equity, Margin Call Level and Stop Out Level?
How to Start Forex Trading and Best Times of Day to Trade Forex
How to Start Forex Trading and Best Times of Day to Trade Forex
With knowledge about some aspects of forex (FX) like what it is, the reasons for you to trade it and who are the market makers, it’s time for you to dig a bit deeper and find more about the trading sessions at forex.
Yes, it’s a fact that the forex market keeps running 24 hours a day; however, it doesn’t remain active round the clock. You can trade money when the market is at its highest active levels with either the market moving up or moving down. In the absence of any such movement, it can be quite hard for you to make money.
This most promising and famous forex market is segmented into four major trading sessions –
- New York Session
- London Session
- Tokyo Session
- Sydney Session
The trading hours of the above sessions depend on their local business hours and 7-9 AM is when generally these sessions open and become active. When a particular session ends in the evening, another exchange takes control over the forex chariot. 8 am – 12 pm is considered as the busiest hours of FX when high volumes of money trading occur.
One who is trading at forex should study well about the time zones, trading timings and most importantly, about when these sessions observe daylight saving time. You can increase your chances to win by trading during the hours when two sessions overlap as this is the time when the forex witnesses the highest volumes of transactions. London and New York are popular to account for more than 50% of the forex trades.
When Can You Trade Forex: Tokyo Session
Talking about the Asian session which means Tokyo session at Forex, it is essential to know that Japanese yen is third most traded currency on the platform and same goes with Japan as it holds the third most traded session of Forex. Tokyo session starts at 12:00 GMT, and during its entire working hours, it gets overlapped by two other sessions, Sydney and New York. This session witness around 21% of the FX transaction per day. Private companies and Central Banks are the leading traders who remain highly active during the Tokyo session, Japan’s economy is mainly dependent on exports and from the last few year’s China has also emerged as a significant trade player.
The most suitable and trade worthy time is the early hours when economic and finance related updates get updated, and FX market rates start rolling. Tokyo session also acts as the leader of other sessions because the moves which get set at this session gets followed or at least studied by the later coming sessions. Thinning of liquidity is a common scenario in the Tokyo session, and traders often wait for long hours to set a good trade. While liquidity gets the stick, currency pairs became immobilized and get glued within a range. It provides a chance to short day traders or potential breakout traders in the last hours of the day.
Majority of the traders likes to trade in currency pairs like AUD/JPY followed by USD/JPN. Japanese yen holds a great place in FX market place as around 16-17% transactions get done through this JPY.
When Can You Trade Forex: London Session
Forex has multiple trading spots in entire Europe, but London is what, which drags most trader’s attention. There is no doubt in the fact that London has always been an essential part of various trading markets and the same is the case with FX. Near around 30% of the whole Forex, transactions happen in the London session when thousands of businessmen and traders are doing transaction per minute. European session or London sessions starts when Asian ones are about to close their shops, this Forex capital of the world crosses its session with other significant FX sessions which are the USA and Asia.
London session starts at 3:00 am and keeps running till 12:00 pm, and is considered as the most volatile session with a high frequency of liquidity. While it picks its momentum with high trading volume by arriving mid hours, 8:00 am is the time when the US session starts and overlapping between these two provides better opportunities to traders. London session is the one, where most of the trends begin, pips get spread, and volatility gets down after lunch hours. There are many times when the FX market shows good possibilities; it is the time from 8:00 am to 12:00 pm which is more crucial and critically important for traders. Majority of trading happens between these 4 hours, and undoubtedly, these are the best hours to buy-sell currency pairs at the London session. Most favorable currency pair which people trade in is EURO, US Dollar, Japanese Yen, and Swiss Franc.
When Can You Trade Forex: New York Session
New York is the second largest Forex market place, first being London. The New York or the US session attracts a significant number of forex traders owing to the ever-growing demand for its currency US dollar or USD.
New York sessions start when the London market place has almost finished its lunch break. As soon as the Forex’s US sessions open at 8:00 AM EST or 1:00 PM GMT, the major currency pips start moving with big steps. This can be attributed to the fact that when the US traders start rolling their quotes, their European counterparts are already engaged in the process causing overlapping of the two markets resulting in highest volatility and liquidity.
The most favorable time to start forex trading in the New York session is as soon as the session opens. Once the New York session reaches lunch break, the European market gets closed and the liquidity and volatility take a hit and begin to die down. So, it’s advisable to make trades before the lunch hour focusing on the most economic updates and news.
Considering the fact that around 80-85% of the forex trading involves USD, being an early bird is what this session asks for. Fridays are the days with least mobility in pips as both the European and Asian markets remain mum forcing the US traders to close their shop after a half day. The most traded currency pair in the US session is USD and EUR.
Best Times of Day to Trade Forex
Best time to trade on Forex is one when the majority of FX traders are trading. One can compare it to the TRP of a television show; more the people watch it, and more it becomes popular. Similarly, a significant frequency of traders will give more liquidity, ultimately resulting in favorable trading. Depending upon the overlapping sessions, people often prefer to trade during those times, as two markets open at the same time will give more opportunity. Well, this is partially correct but if you want to be a long runner, understand the pattern and trading sessions.
Majority of traders like to trade in Asian, European and American trading sessions, Forex itself being the most significant and unique market place, its week starts from 6:00 pm EST on Sunday and keeps running till Friday 5 pm. To check the best time, try to trade when more than one market place is open, as it provides mobility in pips. Trading with one market place open freezes pips, and you can observe low movements. Another essential thing to know is that whenever a piece of recent news flashes in the world, particularly news or event related to the economy, the Forex market gets affected with it.
A piece of sudden news from finance corridors of a country holds the power to rise or down the exchange rates and that this is the most convenient time for a trader. As rates change within seconds, FX traders become active, and pips start changing rapidly. Concluding this topic, we can say that most preferable times of a day are when two or more markets are opened, when there is a high volume on FX (generally midday) and last but not the least when a new economic update comes.
Best Days of the Week to Trade Forex
If you go by the volume of movement that London witnesses during its trading hours, it is undisputedly the busiest session of the forex market. However, this doesn’t imply other sessions do not receive high movement. All forex markets have a few days in the week when trading volumes reach very high levels.
It is impossible to confidently pinpoint a particular day of the week when the market provides the highest opportunities. However, based on the stats and previous trade patterns, the successful and experienced traders on Forex prefer the days of the midweek like Tuesday, Wednesday and Thursday which present more opportunities for a profit considering the volatility nature of the market during those days.
Mondays tend to be not so good days to trade as price movement tends to be slow with most of the forex traders still undecided trying to get some sense of the direction of the market. Fridays are not-so-great days for trading on forex as there are high chances of market winding down with the hours passing by. Be cautious if you wish to trade on these days, bearing your time zone in mind.
Keeping an eye on the European market will be beneficial as it remains most active in terms of the volume and you can figure out the best time to invest your money in currency trading. Hence, even though the forex operates 24 hours for the five days of the week, in order to make profits you have to understand the market trends during different days of the week to know the best days when the market picks up and trade accordingly.