Best Time To Trade Forex
With over 200 countries around the world, you will find loads of currency pairs to partake in trading. However, those currency pairs cannot provide the best returns to traders. So, what’s the right currency pair to trade? What are most traders trading? Whose currency pair is worth dealing with, and why? Keep reading this post to find answers to these questions and more!
Before evaluating the best trading pairs, it is easier to develop our awareness of the most common currencies that can be used in Forex trading. They include:
- U.S. Dollars (USD)
- Euros (EUR)
- Australian Dollars (AUD)
- Swiss Franc (CHF)
- Canadian Dollars (CADs)
- Yen (JPY)
- UK Pound (GBP)
You will find a few common currency pairs out of these currencies. If you want to make Forex trading success, you must have a deeper understanding of the currency pairs that you trade.
Many of the big currency pairs that can be seen in the real world are packed with little spreads. However, because of its uncertainty, this statement does not apply to the USD / GBP currency pair. Perhaps it is easier to avoid currency pairs with large spreads. The suggested spread by trading experts seems to be about 0-3 pips. If it goes beyond 6 pips, the trading pair can become too costly, which can lead to greater losses.
It doesn’t imply that you can entirely skip anything that has big spreads. The best way to trade wisely and efficiently in this respect will be to practice risk management throughout your trading so that you can handle the risks effectively.
Usually, the right pair for you is the one you know best about. It could be incredibly helpful for you to exchange the currency from your own country. Of course, it is not listed in the majors. It is only valid if the local currency is still very unpredictable. In general, understanding the political and economic problems of your country results in additional information on which you can base your business.
You will find this information via economic updates in our Forex calendar, which also shows the estimates and projections for these updates. It is also advised that you avoid exchanging pairs that include your local currency (also regarded as ‘exotic pairs’). In most situations, the local currency pair would be cited against USD, so you need to keep vigilant about that currency as well.
When is the best time to trade Forex?
Before we look at the right times to trade, we need to think about what’s going on in the Forex 24 hours day. The Forex Market can be divided up into four main trading sessions: the Sydney Session, Tokyo Session, London Session, New York Session.
Many first-time Forex traders hit the ground running. They watch various economic calendars and trade ravenously on every data update, seeing the foreign exchange market 24 hours a day, five days a week as a simple way to trade all day long. Not only does this technique deplete a trader’s savings easily, but even the most successful trader will burn out. Unlike Wall Street, which operates on a daily business hour, the Forex market operates on the usual business hours of four various parts of the world and their corresponding time zones, which ensures that trade continues all day and night.
So, what’s the solution to being up all night long? If traders will develop an awareness of market conditions and set realistic expectations, they can have a much better chance of making money on a workable timetable.
When is Forex open?
First, here is a short description of the four major markets (Time in Eastern Standard Time or EST):
New York (open 8 a.m. to 5 p.m.) is the second biggest Forex marketplace in the world, actively controlled by international investors, since the U.S. dollar is included in 90% of all exchanges, according to “Day Trading the Currency Markets” by Kathy Lien(2006). New York Stock Exchange (NYSE) will have an instant and significant influence on the dollar. As businesses combine and deals are finalized, the dollar will immediately benefit or lose value.
Tokyo, Japan (open from 7 p.m. to 4 a.m.) will be the first Asian trade center to open, taking up the most significant portion of Asian markets, just ahead of Hong Kong and Singapore. The currency pairs that usually have a fair share are USD / JPY (or U.S. dollar vs. Japanese Yen), GBP / CHF (British pound vs. Swiss franc), and GBP / JPY (Uk pound vs. Japanese yen). The USD / JPY is a particularly interesting pair to monitor when the Tokyo market is still the only one available because of the significant impact the Bank of Japan (Japanese central bank) has on the economy.
Sydney, Australia (open from 5 p.m. to 2 a.m.) is where the trading day formally starts. Although it is the smallest of the giant-markets, it sees a lot of initial activity as markets re-open on Sunday afternoon, so individual traders and financial firms are seeking to regroup after a long break from Friday afternoon.
London, Britain (open 3 a.m. to noon): the U.K. controls the money markets around the world, and London is the key feature. London, the world’s largest trade hub, accounts for about 43 percent of global trade, according to the BIS report. The region often has a significant effect on currency volatility since the U.K.’s central bank, the Bank of England, which determines interest rates and regulates GBP monetary policy, is headquartered in London. Forex movements also emerge in London as well, which is London. Professional trading includes an interpretation of prospects using statistical patterns, sentiment, and market fluctuations.
What is the best time to trade Forex?
Currency trading is peculiar due to its hours of service. The week resumes at 5 p.m. EST on Sunday and will run until 5 p.m. It’s Friday.
Not every hour of the day is equally ideal for trading. The best time for trading is when the market is most involved. When greater than one of the four exchanges is opened concurrently, there will be an intensified trading environment, which ensures that there will be a more considerable fluctuation of currency pairs.
If only one market is available, currency pairs appear to be trapped in a close pip-spread of around 30 pips of movement. Two markets, opening at once, can easily see 70 pips moving north, particularly when major news is published.
What are the best times to trade Forex?
The best time to trade would be during overlaps in trading periods between open markets. Overlaps imply higher price rates, resulting in expanded opportunities. Here’s a closer look at the three overlappings that happen every day:
- U.S./London (8:00 a.m. to 12:00 a.m.): the highest market overlaps exist in the U.S./London markets. More than 70% of all trades occur as these markets intersect since the U.S. dollar and the euro (EUR) are the two most common currencies to transact, according to Lien. It is the most optimal trading time because the volatility (or market activity) is high.
- Sydney / Tokyo (2 a.m. to 4 a.m.): this period is not as unpredictable as the U.S./London overlapping, but also provides an opportunity to trade in a cycle of more massive pip volatility. EUR / JPY is the perfect currency pair to strive for since the two major currencies inspire them.
- London / Tokyo (3 a.m. to 4 a.m.): this gap indicates the least amount of movement of the three because of the timing (most U.S.-based traders won’t be up at this moment), and the one-hour delay offers no chance to see significant pip shifts occur.