The foreign exchange market, or forex, is a global decentralized market. Optimal times to trade the forex market are when the market is most active, which is often when the trading hours of major regions overlap.
With higher activity, trading spreads, or the differences between bid prices and ask prices, tend to narrow. At these times, less money goes to the market makers facilitating currency trades, which means traders can pocket more.
Key Takeaways
- Four major foreign exchange markets in London, New York, Sydney, and Tokyo have different trading hours.
- Traders can benefit from knowing when the trading hours overlap.
- During overlapping forex market hours, volatility tends to increase.
The 4 Major Forex Markets
Within the global market, the four major forex exchange markets are in London, New York, Sydney, and Tokyo. Forex traders often commit their hours to memory, paying particular attention to the hours when two exchanges overlap.
Note
When more than one market is open at the same time, this increases trading volume and adds volatility which is the degree to which equity or currency prices change. The volatility can benefit forex traders.
While some investors fear market volatility because of the increased risk, forex traders generally prefer greater volatility because they have the potential to earn higher profits.
Worldwide Forex Markets Hours
The forex is fully electronic and open somewhere in the world between 5 p.m. Sunday and 4 p.m. Friday Eastern Standard Time (EST). Each region has major exchanges with unique trading hours from Monday through Friday. From the average trader's perspective, the four key time windows RE (all times are in EST):
- London: 3 a.m. to 12 p.m. (noon)
- New York: 8 a.m. to 5 p.m.
- Sydney: 5 p.m. to 2 a.m. (midnight)
- Tokyo: 7 p.m. to 4 a.m.
While each exchange functions independently, they all trade the same currencies. So, when exchanges in two markets are open, the number of traders actively buying and selling a given currency greatly increases. The bids and asks in one forex market exchange immediately impact bids and asks on all other open exchanges. That reduces market spreads and increases volatility, including in the following windows:
- 8 a.m. to noon, with both the New York and London markets open
- 7 p.m. to 2 a.m., with both the Tokyo and Sydney markets open
- 3 a.m. to 4 a.m., with both the Tokyo and London markets open
Note
Many investors consider the best trading time to be the 8 a.m. to noon overlap of the New York and London exchanges. These two trading centers account for more than 50% of all forex trades. On the flip side, from 5 p.m. to 6 p.m., trading mostly happens on the Singapore and Sydney exchanges, where there is far less volume than during the London/New York window.
There can be exceptions, and the expected trading volume is based on the assumption that no major news will come to light. Political or military crises that develop during otherwise slow trading hours could potentially spike volatility and trading volume.
Certain economic data that can move the market has a regular release schedule. Key economic data include employment figures, Consumer Price Index (CPI), trade deficits, and consumer confidence, and consumer consumption. Knowing when this news is set for release can help you plan when to trade.
High-Volume Forex Trading Hours Can Be Risky
Note
Forex traders should proceed with caution, because currency trades often involve high leverage rates of 1,000 to 1. While this ratio offers tantalizing profit opportunities, it comes with an investor's risk of losing an entire investment in a single trade.
Forex trading is risky. New forex investors should consider opening accounts with firms that offer demo platforms, which let them make mock forex trades. With the practice trades, you can tally gains and losses to see how you would perform with real trading. Once investors learn become more experienced, they can begin making real forex trades.
Like many other investments, you can earn significant profits, but you could also suffer losses. So, make it a point to prepare for the risks involved.
Frequently Asked Questions (FAQs)
How does forex trading work?
Forex trading is the trading of different currencies to make money on changes in currencies' values relative to one another. Most of this trading occurs via electronic platforms or over the phone rather than on exchanges. Each trade involves a pair of currencies.
How many hours of trading per day do you need to make money in forex?
Your ability to make money trading forex depends on the proportion of trades you profit from and the size of your profits, not necessarily the time you spend.
How do I start trading forex?
To start trading forex, you'll need to make an initial deposit with a brokerage. Many brokerages don't have a minimum amount for trading forex, but you typically need between $50 and $500. Consider making practice trades on a demo platform before you start risking your real money.
FAQs
The U.S./London markets overlap (8 a.m. to noon EST) has the heaviest volume of trading and is best for trading opportunities. The Sydney/Tokyo markets overlap (2 a.m. to 4 a.m.) is not as volatile as the U.S./London overlap, but it still offers opportunities.
What is the best time of the day to trade forex? ›
The forex market is usually most active when the market hours overlap between sessions, as this is when the number of traders buying and selling each currency increases. The overlap windows for exchanges are: 1 pm to 4 pm (GMT) when both New York and London exchanges are open.
What is the best time to make money in forex trading? ›
The best time to trade forex depends on three primary factors: trading volume, volatility, and overlaps between major financial centres. Forex trading volume largely depends on financial centres' opening and closing hours worldwide. The highest trading volume typically occurs during the London and New York sessions.
What are the key times for forex trading? ›
While time periods overlap, it is generally accepted that the following periods are the most active for each region:
- New York: 8 a.m. to 5 p.m. (EST)
- Tokyo: 7 p.m. to 4 a.m. (EST)
- Sydney: 3 p.m. to 12 a.m. (EST)
- London: 3 a.m. to 11 a.m. (EST)
From experience, I can tell you that two of the best time frames to trade are the daily and 4-hour. This isn't to say that you can't be profitable trading a different time frame, but these two are what made me profitable as they work the best with the price action strategies I use.
When not to trade forex? ›
There will be times where a currency is moving differently from normal. Perhaps price is spiking and you don't know why. This is a good time to stay out of the market. If you can't understand why price is behaving in a certain way, it is usually due to some unscheduled news that has been released or leaked.
Is it better to trade forex at night? ›
Night trading on the forex markets has advantages for new traders as volatility tends to be lower and for experienced traders using scalping or automatic trading strategies that tend to work well with less volatility.
Is $500 enough to trade forex? ›
This forex trading style is ideal for people who dislike looking at their charts frequently and who can only trade in their free time. The very lowest you can open an account with is $500 if you wish to initiate a trade with a risk of 50 pips since you can risk $5 per trade, which is 1% of $500.
Is $1000 enough to start forex? ›
Believe it or not, you can start forex day trading with $1,000 or even less. It requires mastering position sizing and managing risks, but if you navigate your way to success, the rewards can be significant. In this article, we will discuss in detail how you can day trade with $1000.
Can you day trade forex with $100? ›
A $100 deposit is sufficient initial capital to open a forex trade in a real Forex account without breaking risk management rules. On average, traders with medium-level experience can earn over 10% of the deposit per month. Professional traders' earnings can exceed 500% a year.
For day trading, 15-minute charts and 30-minute charts are the offer optimal results. Day traders who use indicators in their day trading strategy can use a 15-minute or lower time frame. In the case of price action-based trading, a combination of the 15-minute and 30-minute time frames proves to be highly effective.
How long should you trade forex a day? ›
Scalping (1-minute to 15-minutes): This is a short-term trading strategy where traders aim to make small profits by entering and exiting positions quickly. Day Trading (1-hour to 4-hours): Day traders hold their positions for a day or less, closing them before the market closes.
Which session is best to trade forex? ›
The London - New York Overlap (2:30 pm - 4:30 pm GMT) The European - US overlap is often considered to be one of the best times for trading forex. Trading in all the European currencies is heaviest during this period and offers the most liquidity for currency pairs involving the euro, pound sterling and Swiss franc.
What is the most profitable time to trade forex? ›
The U.S./London markets overlap (8 a.m. to noon EST) has the heaviest volume of trading and is best for trading opportunities. The Sydney/Tokyo markets overlap (2 a.m. to 4 a.m.) is not as volatile as the U.S./London overlap, but it still offers opportunities.
What timeframe is best for scalping? ›
Best forex timeframes for scalpers
Scalpers usually work within very small timeframes of one minute to 15 minutes. However, the one- or two-minute timeframes tend to be favoured among scalpers. To action this strategy, you must choose a highly liquid currency pairing, and then you can open an account with us.
What is the best day to trade forex? ›
In short, Tuesday, Wednesday and Thursday are widely considered to be the three best days of the week to trade. Forex trading is best at the busiest times. This often means the best return on your investment, as well as the most profitable trades.
What is the most profitable time to day trade? ›
The opening period (9:30 a.m. to 10:30 a.m. Eastern Time) is often one of the best hours of the day for day trading, offering the biggest moves in the shortest amount of time. A lot of professional day traders stop trading around 11:30 a.m. because that is when volatility and volume tend to taper off.
What time do most day traders trade? ›
The best times to day trade
Day traders need liquidity and volatility, and the stock market offers those most frequently in the hours after it opens, from 9:30 a.m. to about noon ET, and then in the last hour of trading before the close at 4 p.m. ET.
What is the best forex to day trade? ›
What is the best forex pair for day trading? The EURUSD typically has ample movement and the lowest spread. The USDJPY also has a low spread and lots of daily movement. The GBPUSD often has more movement than the others, but also has a higher spread.
Does time matter forex trading? ›
The forex market works on normal trading hours in four parts of the world and their respective time zones, which means that it is open 24 hours a day. However, not all hours of the day are equally good for trading. The best time to trade is when the market is most active.
