To receive new articles instantly Subscribe to updates.
What is the best time of day to trade forex
Written by: PaxForex analytics dept - Tuesday, 02 February 2016 0 comments
One of the many advantages of the forex market is that it is open for trading 24 hours a day. Unlike the stock market, the currency market works according to the normal business hours of the three business centers spread across different time zones. Traders have the freedom to trade as and when they choose, depending on their particular interests. Objectively, there is no such thing as the best time to trade forex for any one trader - it all depends on individual preferences, aims and strategies.
The trading day consists of multiple trading sessions: the European session, American session and the Asian session – also known as the London, New York and Tokyo or Sydney sessions. This is because there is no single exchange in the forex market and different countries trade at different times. When thetraders in London have stopped trading for the day, the traders in New York continue. When the traders in New York stop trading for the day, then the traders in Sydney begin.
The best time of day to trade forex will vary depending on what type of strategy you trade. While major markets are open, populartrading pairs will tend to have trends
lasting an hour or more and moderate to high volatility. This will favor trend traders or traders seeking volatility. Traders who utilize a range trading strategy or prefer less volatility will likely find the quieter times of day more suited to their day trading style.
The forex market operates 24-hours a day during the week because there's always a global market open somewhere due to time zone differences, but not every global market actively trades every pair. Therefore, different forex pairs are actively traded at different times of the day. When London (and Europe) are open for business, pairs that involve the euro (EUR) or British pound (GBP) are more actively traded. When New York (U.S. and Canada) are open for business, pairs that involve the US dollar (USD) and Canadian dollar (CAD) are more active.
According to research, the best days of the week to trade are from Tuesday to Wednesday, as well as Friday, when things can get a bit hectic as the week comes to an end. For many traders, the best way to generate the biggest profits is to ride the market's momentum. Many traders therefore thrive on volatility – the further the market jumps or falls, the greater opportunity there is to make money.