When to Trade Forex?

[Zack Zarr 5]

Best Times to Trade Forex

 

Forex market is open 24 hours a day, 5 days a week. So, does that mean you can trade forex throughout the day, wherever in the world you are?

 

The answer is “it depends”!

 

It all depends on your style of trading. For a long term trader, the time od the day is irrelevant. Long term forex trades, who are looking for days and weeks of building their positions, the time of the day is not important. However, the times of high volatility serves them the benefit of being able to fill their orders at the price they want, and not at the price market forces them.

 

In contrast, short term traders are heavily relying on the time of the day. Why?

 

For this type of trading, high volatility in the market is a must. Another important factor in short term forex trading is the spread. During the times of low volatility, the spread become wider because brokers always have to make money from your trades! So, when the market is volatile?

 

 

This image demonstrates a snapshot of major forex markets around the word with their open and close times in both GMT and EST time zones. As one can imagine, the times of overlap are best for ensuring high volatility and low spreads. However, depending on the time of the day, some pairs might be preferred over others. This is the case during the Asian session when the JPY, AUD and NZD pairs are most active. During the London session, all the pairs are tradable. This is due to the big portion of the London market in the entire forex market (about 37% of the entire market). To put in perspective, New York and Tokyo are responsible for 17% and 6% of the overall market share. So, essentially sticking to the London session can be a good choice for starters. The most volatile session is the overlap of the two biggest markets, London and New York. This the most volatile with lowest spread during the day.

 

So, if you are planning to start short term trading in the forex market, pay attention to these times of overlaps to take advantage of the low spreads.

 

Another important factor impacting the volatility is the economic news. These are large central banks decisions on the rates, inflation reports, job reports, etc. While the volatility is extremely high during the news release, it does not mean they are tradable in terms of short term trading. The spike in the volatility comes with the large spreads in all the pairs involved and affected. This is also to ensure the brokers make their share of profit during these times. This is more explained in the structure of forex market in our education page as well as our book.

 

You can find the information regarding the exact time of these news release, the expected numbers and previous release number in many forex news outlets. Common outlets that I use on my PC and mobile are listed below:

 

https://www.forexfactory.com/

 

https://www.myfxbook.com/en/forex-economic-calendar

 

https://www.dailyfx.com/calendar

 

Zack