What Is the Best Time of the Day to Trade Forex?
The foreign exchange market is active 24 hours a day during the weekdays, and traders can set appropriate schedules to trade the forex market.
This around-the-clock forex market allows investors and traders worldwide to trade in the middle of the night, during normal business hours or even after work.
The forex market is broken down into three manageable trading sessions: Aussie/Asian Session, New York Session and London Session.
One key benefit of forex trading is that Traders and investors can focus on one of the three trading periods rather than trading the forex market 24 hours a day.
Forex Market Sessions
The European or London session opens at 0800hrs GMT: just as the Tokyo session closes. London, Great Britain, is a leading trading capital of the world, accounting for approximately 43% of global trading.
Trading from London has a massive impact on currency fluctuations, since The Bank of England, Britain’s central bank, controls the monetary policy and sets interest rates of GBP.
Due to its impact on global trading, technical traders should keep in mind that Forex trends most often originate from London.
Technical trading mainly involves analysing and studying the forex market using momentum, statistical trends and price movement.
London is a leading global financial hub recognised and used as a reference for all the major European financial centres.
New York Session
The New York session begins at 1300 hours GMT, while the London session is still active and running and closes at 2100 hours GMT.
The New York session features a lot of activity, particularly during the early hours when it overlaps and interlocks with the open London session.
Most market movements are driven and affected by the US dollar, the most traded and influential currency in the Forex Markets.
Moreover, the events and news that impact and influence the US dollar are usually released in the New York session early hours.
There is high volatility and liquidity in the early hours when the New York/London session overlap between 1300 hours GMT and 16000 hours GMT, where most currency pairs feature tighter spreads.
The Asian session usually begins when the Sydney market opens at 2200 hours GMT.
It’s usually referred to as the Sydney open while also being the actual time when the New Zealand financial markets open.
The Asian sessions run up until Tokyo closes at 0800 hours GMT.
The Asian session usually features lower than optimal liquidity for most currency pairs trading within a range or channel at this time, other than the AUDUSD , USDJPY and NZDUSD pairs.
The low liquidity in the Asian session means that the currency pairs are typically attract relatively larger spreads (meaning you need to make more gains before realising a profit).
Most activities and market changes happen during the early hours of the scheduled release of relevant economic news, such as the Australian or Japanese interest rates, employment figures or inflation rates.
Generally, the best currencies to trade in the market during the Asian session are the Australian, Japanese, and New Zealand dollar.
Forex traders should be keen and watch out for the news releases from the statistics agencies and central banks in Australia, Japan and New Zealand,.
Institutional Traders’ Influence on the Market
Institutional forex traders trade much larger amounts and invest in assets or securities that are not usually available to retail traders; this includes swaps and forwards.
Institutional forex traders invest and trade in large-volume transactions making it easy for them to change, impact and manipulate the price of a currency pair.
These traders can sometimes split trades among distinct “wholesale” brokers or over time to avoid making a material impact.
Institutional traders sell and buy forex trading positions for the various accounts they manage for a financial institution or group.
Institutional traders make money trading forex by taking advantage of the liquidity it guarantees and the ability to trade at the most appropriate times due to the 24-hour feature of the forex market.
The “Best” Time to Trade Forex in Australia
Sydney and Tokyo’s trading hours interlink and overlap from 23:00 GMT to 7:00 GMT, when the volume of some regional currencies, including AUDUSD, USDJPY and NZDUSD reach their peak.
The number of traders trading simultaneously increases significantly when trading sessions overlap, affecting the trading volumes.
During this time, there is a high probability of orders being completed, reduced likelihood of slippages, narrowing of spreads between currency pairings and increased liquidity.
Despite of Australia being one of the smallest in the mega markets, it has a lot of early activities when the markets open on Monday mornings (Sydney time).
This is usually when financial institutions and individual traders attempt to recoup their gains or losses after an extensive break beginning from Friday afternoon.
After analyzing and studying the market trading overlap, experienced traders in Australia found that the best time to trade in Australia is usually between 09:00 and 17:00 Sydney time.
During this time, there is often an incredible increase in liquidity and market fluctuations.
Learning how to trade forex by understanding some of the best forex trading pairs when trading in the Australian trading sessions is essential.
Bank of international settlements states that trade in the GBPUSD and EURUSD pairs take a significant portion of all forex market activity in the Australian / Asian Market.
The AUDUSD and USDJPY pairs follow and potentially some activity occurs on the NZDUSD.
It’s crucial to know the times to pause forex trading in Australia, particularly during periods of low liquidity.
Avoiding and pausing forex trading during low liquidity and highly volatile markets will help you save money on your trading position and potential bid offer spread charges.
The Final Word on What Time To Trade Forex
When trading the forex market or currencies, it’s vital to determine how the high or low volatility of the market will work best with your trading style.
Knowing how to trade forex during the typical economic release time or session overlaps might be preferable if more considerable price action is desired.
It’s essential to determine the best times to trade forex by analyzing the time frames that are most active for your preferred pair to make more money while trading forex.
Many Retail Traders in Australia who are still holding down a full time job often find that the London morning session is when they have the most opportunity to find high probability trades on the GBPUSD and EURUSD (sometimes the AUDUSD).
Those traders trading during the Australian daytime hours often will focus on the AUDUSD and the GBPUSD with some opportunities often available on the EURUSD and the USDJPY.
For more trading term general definitions, visit our A to Z of Forex Trading
To look at these concepts in action, please visit our sister site, Latest Forex Rates
What to do Next
If you have more questions or need further guidance, don’t hesitate to reach out to us at The Trading Coach International for personalized coaching and support.
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The information, strategies, techniques and approaches discussed in this article are for general information purposes only. The Trading Coach International does not necessarily use, promote nor recommend any strategies discussed in this article. The information in this article may not be suitable for your personal financial circumstances and you should seek independent qualified financial advice before implementing any financial strategy. The Trading Coach International is not a financial advisor and does not have AFS registration.