Which Are The Best Times To Trade FOREX?
For newcomers, FOREX can be a bit difficult to understand in many ways; some may be confused with how the pairs are related while others may not comprehend the chart patterns or what affects volatility.
However, an unexpected confusion may arise: times.
Forex is not a regular market when it comes to availability, so newer traders may have a hard time knowing when to trade.
However, don’t be scared, for we are here to tell you when you should be trading.
Forex Availability: When Can You Trade FOREX?
Forex is considered the best market in terms of availability thanks to the fact that—unlike the regular stock market—it is open 24 hours a day, from Monday to Friday.
This fact may come off as a surprise for those used to trading stocks, who probably held trades overnight, as all markets closed after a specific time of the day. Such new traders are then introduced to possibilities like scalping and day trading thanks to the liquidity of FOREX.
All markets open on Sunday 5pm EST and at the same time on Friday, giving traders a full cycle of 120 to trade with no interruptions.
However, this characteristic also comes off as a disadvantage when compared to a market like cryptocurrencies, which stays open as long as the internet allows.
What Are Trading Sessions?
There are specific moments during the day when specific markets open around the world; these markets are called “trading sessions”. They are exactly what makes the FOREX market be open for so long.
Trading sessions themselves are the times of the day where the markets of each country are functioning. In fact, the FOREX market is available 24 hours per day because these markets open and close continuously, and some even stay open simultaneously. So, the FOREX market is not just one perpetual sector, but several smaller markets that make up the larger picture.
The most important trading sessions for traders are, of course, the largest ones: Sydney, Tokyo, London, and New York, naturally corresponding to some of the strongest economies of the world.
Of course, there are many other, smaller sessions, but these four are the most important. They are grouped in three “macro” sessions named the Asian, European, and U.S session, respectively.
Why Are They Important?
First of all, they are the backbone of the FOREX market.
As already stated, the FOREX market can stay open uninterrupted for the biggest part of a week because these sessions are always opening and closing simultaneously with no resting time in-between.
That is what makes the FX market function the way it does.
However, that is simply looking at it from a functional point of view, and that is not exactly what traders are most worried about when it comes to taking advantage of these sessions.
These markets allow trading for the large institutions on their territory. Large institutions mean banks and financial institutions like hedge funds, so this gives a huge boost in liquidity each time a session opens.
The end result is a price action stimulus around the opening and closing times of each sessions we will evaluate in a moment.
Another critical factor about these sessions is that they each belong to a nation and utilise their respective currency, so the liquidity boost is even greater for pairs including their related coins.
As such, trading sessions not only tell traders when to trade, but they also say what exactly should they trade.
The Vital Forex Trading Sessions.
As stated, the sessions are simplified as three, combining the Sydney and Tokyo into one. Now, we will evaluate the specific features of each sessions.
- Sydney and Tokyo (Asian) Session.
These two sessions are grouped together as the Asian session. It starts with the Sydney opening at 5pm EST and ends with the Tokyo closing at 4am EST. They overlap from 8pm to 2am EST, marking the largest activity of this session.
Naturally, this session means that the best pairs to trade are those including the AUD and JPY. Combining these with the usually liquid EUR and USD pairs makes up a great choice for those looking to cash in good returns on scalping techniques and minutes or hours-long trades. Additionally, the the economic news released during this session also includes New Zealand, giving an extra boost to pairs containing the NZD.
Out of those, the most heavily traded currency is the JPY.
21% of the Forex transactions are made in this session.
- London (European) Session.
This is a very special session for Forex since London is seen as the capital of this market, attracting the most interest among financial centres in Europe—most of which are huge. London ends up being the key financial centre.
True to that fact, 32% of all Forex operations occur during the European session, also meaning enormous liquidity and significant trends. Most downtrends and uptrends are seen during this session.
Regarding trends, they are also stronger than other sessions, as volatility slows down during in this market since it happens around midday at the GMT timezone. Another great advantage is that spreads decrease during this session.
European traders tend to close their trades as the session ends, so reversals are more possible as it closes. The session lasts from 3am to 12pm EST.
Naturally, the strongest pairs are those including the EUR and GBP.
- New York (U.S) Session.
Lastly, the U.S session opens at 8am and closes at 5pm EST, usually when London traders “come back” from having their lunch, and both sessions overlap from 3am to 8am EST.
This is the least crowded session on the list, as only 19% of trades happen in this window, and 85% of those involve the USD, giving an even stronger liquidity to an already dominant currency.
There is a very important moment in this session from 8am to 12pm EST, when it overlaps with the European session. Liquidity skyrockets during this time. However, the market calms down in the afternoon, as the European session ends and the US remains open.
Friday is a very interesting day for this session; this is because price action moves far less in the afternoon that day, and trend reversals are much more likely during its second half, making it a very unstable day for trading—or an exciting one for thrill seekers!
As for economic news, most of them are released during the first hours of the session.
When SHOULD You Trade Forex.
Of course, there is always more than meets the eye, and there are other, very positive approaches and moments for you to trade at the best moment for yourself.
You do not need to know every trading session if you are not a technical trader, or if you prefer long-term investment over short or medium terms. There are other ways you can keep track of your currency pairs even if you would rather not bother yourself with the trading sessions.
There are two other ways you can measure time for trading.
- Trading The News.
You can completely forget about trading sessions if you know how to predict economic outcomes from news reports. For example, if the U.K announces an increase in interest rates, you should have a clear signal to start buying GBP pairs.
This analytic capacity can go a long way into making you a successful trader without even having to worry about trading sessions!
- Setting Up A Schedule.
Knowing all the opening and closing times of all major sessions will do nothing for you if you cannot keep a regular trading schedule and end up leaving everything to random trading anytime you “feel like doing it”.
Traders are much more likely to be successful when they schedule their day as if trading was a regular job, setting up specific hours for them to check their charts and positions.
This effectivity increases dramatically when you manage to coordinate your trading schedule with the trading sessions, so take your time to organise your day according to your own needs and abilities.
You must be able to trade comfortably but effectively.
Trading sessions are what makes the FOREX industry what it is and as profitable as it is right now. They are its life and its driving force, so anyone looking to be a successful trader must be aware—at least—of how they work.
Trading sessions give you clues regarding when to trade and what to trade during said times, and this is something that must be ingrained in your trading mindset.
However, trading the sessions is not the only way you can trade, and you should not feel discouraged if you cannot get a grasp on them, as there are many other ways you can conduct your trading career.
The most important part of trading is to make it profitable your own way!
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