The Best Times to Trade Forex

Best Times to Trade Forex

There have been many questions fired at me over the years or been discussed in our Trading Room regarding trading in general whether it be trading forex, indices, or any other chart. Usually they are to do with the placing of stops and when to take profits, but another one high up on the list is, “When are the best times to trade?”

It is not an easy question to answer as there are so many variables – which currency? … which pair? … where do you live? … which commodity? … which index? … etc etc…

Liquidity

The main thing is that you need liquidity in the market you wish to trade so that it actually moves thus presenting opportunities to profit. A flat market is good for neither man nor beast and being stuck in a flat-liner only serves to raise the blood pressure. It follows then that the better times to trade is when the liquidity is higher, when there are more traders buying and selling.

When liquidity falls off you will notice that the market flattens out and generally goes nowhere. The opportunities for profit are diminished and the chances of suffering a losing trade are increased. Fortunately, there are certain times of the trading day when this occurs, with one or two other pointers to help in our decision to stay out or look for a trade. We’ll come to this in a moment.

Volatility

No matter where you live on the planet, or which instrument you are trading, there comes a time when volatility plays a part and can change the whole outlook of your chart. The price candles (or whatever you use) start jumping and falling all over the place making it almost impossible to make a rational decision on where to enter a trade, never mind in which direction.

It is on these occasions that it is most likely the better option just to sit back and watch what is going on and let the drama play itself out. The chances of suffering a losing trade during high volatility are increased many times. The beauty of trading is that there will always be an opportunity presenting itself just around the corner so it is the trader who has the patience who will most likely profit (ie, not lose) from not trading in high volatility markets. Take a break during the high-impact news with the aim of preserving your account. A move of fifty or more pips, or points, in less than ten seconds is not unheard of. Don’t be caught out.

News

Draghi speaks

Draghi speaks

The catalyst to that volatility is generally some news item or announcement which sets the cat amongst the pigeons, so it is the wise trader who is always aware of upcoming news and has some idea of worldwide events that may trigger volatility. Not all news is forecast e.g., terrorist attacks, so trading without a stop loss at ANY time is really a no-no. Markets can, and do, start motoring in any direction for no apparent reason. Best to be prepared.

So, we need liquidity but not necessarily volatility, and it would be the wise trader who is aware of the news and when it is due. On certain days there is very little news where the forex (and indices) market tends to have somewhat reduced movements. Some say that without news then the market doesn’t move. There may be some truth in that.

Whilst trading and if you happen to be in our Black Dog Trading Room, then we will not let you forget that news is imminent. Remember there is NO Holy Grail that covers all the aspects of forex trading. Become a master of one and you will then see the results for the better.

24hr Trading?

It’s true. From late Sunday evening to late Friday evening (GMT times) you can trade 24 hours per day if you so wish. And that is just what the amateurs do. Never a thought for liquidity, volatility, or news, and often getting stuck in a flat-liner of a trade when most other traders have packed in for the day. You NEED to pick the best times to trade.

Sessions

This brings us to the three main trading sessions:

Asian – European – North American

Most forex traders refer to these three sessions more casually as Tokyo – London – and New York as these cities represent the main powerhouses or financial centres where the major banks do their business dealings. Thus many traders follow suit and trade at the same time as these institutions.

Forex Trading Times

Forex Trading Times

It must be remembered that these are not the only cities in the respective session so we had better drill down further so that we are aware of what is going on.

Asian (Tokyo) also includes Australia, New Zealand, China, Russia and many others whose scattered markets are considered to be open between 11pm and 8am GMT.

European (London) opens just before Tokyo closes for the day and is considered as running from 7am to 4pm GMT. Bear in mind that many other European countries are included in this session, in particular Frankfurt, Germany, and France, Spain, Italy, etc.

North American (New York) NY dominates most activity which includes Canada, Mexico, and most of South America. Times are unofficial but many factors come into play such as commodities, major news announcements, futures, etc which can expand the New York times from anywhere between noon and 8pm GMT.

Unlike other financial markets, with forex there are no opening bells and no centralised exchange. The forex market opens when you arrive at your desk and pull up your charts..!! So the best times to trade are when there are many many people arriving at their desks and pulling up their charts thus creating liquidity.

In my many years of trading forex (and other outside factors notwithstanding) I have found the best times to trade the forex market is from 8am to about 6pm GMT, which includes the overlap of the London and New York sessions, and taking into account the opening of the NYSE (New York Stock Exchange) too which does have a significant effect on the price movement of forex pairs.

Question: What is the best time to trade?

In my view, the best time to trade forex is between 8am – 6pm GMT as these are basically the hours of the London market and the overlap with the US market. This is the time when the most traders and biggest banks are active. It is widely considered to be the most profitable time to trade. That may not help if you live in Australia, NZ, Hong Kong, etc, so it would probably be wise to trade your local currency at the times that suit you the best.

Unless of course you are a night owl..!!

My Trading Times

My Trading Times

Now, 8 in the morning til 6 in the late afternoon adds up to ten hours but I can assure you that I am not staring at the screen for that amount of time waiting for a trade set up. Here at Black Dog we have alarms with our strategy which call our attention to that particular pair, metal, commodity, or index for when a potential trade may be imminent. Come 4 or 5 in the afternoon and I generally have had enough – time to do other stuff.

It must be said that there are no official trading times and many websites have different ideas on session timings but they are all in rough agreement with the image above.

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