When to Trade Forex and When NOT TO TRADE
It is true that Forex trading is by definition, a market that operates 24 hours a day. This is because there are various key trading zones where market activity in the Forex market is carried out, corresponding to the three major time zone financial districts. These are in London, New York and Asia. It is the activity in these zones, which come up one after the other that give the Forex market its 24-hour appellation.
That said though, we need to point out that even though the Forex market is by definition, a 24-hour market, there are only specific times of the day when the Forex market has enough market activity that traders can profit from. These times are the times when there is overlap of activity between two-time zones. Profits in Forex are only made when there is enough liquidity, volatility and market activity, and these times are the best times to trade. Overlap means more liquidity and more market activity, which produces volatility. In Forex, a trader can only make money when the market is volatile and not when it is nearly still.
Best FX Trading Hours
So the next point would logically be to know at what times we have overlap of two trading time zones. These are the times when there is overlap between the London and New York sessions, the New York and Asian sessions, and the Asian and London sessions.
In studying and memorizing these times, also make some allowance for the Daylight Savings Time (DST) when we have time corrections in March and October to correspond to the equinox changes in the earth’s position relative to the sun.
It is very clear from this table above, that there is a period of overlap between London and New York from 12pm GMT to 5pm GMT, between London and Asia from 8am to 9am GMT. So if you are a trader looking to profit from the best volatility, you can get, then plan your trading around these times. Need that table for your timezone, click here.
Best Forex Trading Days
Knowing the best trading times in a day is one aspect. The other aspect is knowing what days to trade, as there are days when your chances of making money are better. In order to understand the concept of the best trading days, it is important to watch the intra-day volatility of the market from market open at 9pm GMT on Sunday to market close at 9pm GMT on Friday. A study of the market movement of currencies will easily show that Tuesdays to Thursdays are the days with the highest degree of volatility, with volatility being relatively low on Mondays. However, a recent trend has emerged where volatility levels for the week now take off earlier, and that is during the New York session on Monday. Due to not enough volatility, I suggest you to avoid trading during Forex market holidays.
Making this Work for You
One of the most important factors you need to consider when deciding on when to trade and when not to trade is your own body rhythm. In nature, some insects are nocturnal insects; they are most active at night and rest in the day. Human beings are diurnal; we are active during the day and sleep at night. Sleep is very important; without a clear head, the trader becomes extremely error-prone. You need to know how far away in time your area is from the time zones. Those who live in Africa and Western Europe seem to have the best deal of all, as they can easily take the overlaps during waking hours. It is more difficult if you live anywhere else, as you may only be able to trade one overlap session during your waking hours.
So plan your trading times to coincide with when you are at your optimal levels of performance, and trade accordingly. Do not sacrifice sleep for trading.
Want to stay informed which trading session is currently active? Download FX Pulse, a 100% free and very powerful Metatrader plugin which displays information about actual trading sessions directly on your chart.
P.S.: What’s your favorite trading session? Let me know in the comment section.