Like most business ventures, one of the most important things to remember about forex trading is that it is about timing. While the market itself is open 24 hours a day, five days a week, there are sweet spots that you have to keep in mind if you want to make the most out of your trade.
These are known as forex trading hours: the optimal times where the market is active, allowing you to gain more money in your live accounts. Here’s what you need to know to optimize your trading hours.
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Why do trading hours matter?
Aside from the fact that trading outside these hours won’t see a lot of movement, each of these trading zones has unique circumstances that can affect how your trades are priced and sold. Even if all these markets function independently from each other, they still trade the same kind of currency and are therefore affected by each other.
It also helps keep things easier to track for forex traders. If the market is constantly liquid and volatile 24/7, it becomes impossible for you to catch any opportunities to trade with a firm hand. In the worst-case scenario, you could be caught flat-footed when market volatility pushes your currency to a set position, and you can’t respond.
The Four Major Forex Exchanges
Each of these forex exchanges is determined by the business operating hours at that part of the globe. So while the actual trading hours can differ based on where exactly you’re trading from, there are only four major regions/time zones you should follow ( in Eastern Standard time):
- London: 3 AM to 12 noon
- New York: 8 AM to 5 PM
- Sydney: 5 PM to 2 AM
- Tokyo: 7 PM to 4 AM
If you look closely at the times, you’ll notice that one market becomes more active as soon as the other closes, with certain overlaps where the market is more volatile.
- The Tokyo/Sydney Market
Since these timezones are the first ones to access the market after it quiets for the day and opens after weekends, this is where the first trades of each day begin. These markets are the first to experience any liquid movement regarding currency, though keep in mind that other markets should be monitored during these hours like China and Russia.
Because these markets are relatively scattered across the entirety of Asia, liquidity and volatility can be a little more stretched out compared to other markets. Most forex traders will use this early movement to develop their trading strategies and make predictions on where the rest of the market will move.
- London Market
At the tail end of the Tokyo/Sydney trading hours, the first of the European markets start moving. With around 34% share of the daily forex volume, London experiences a large amount of liquidity and volatility compared to the other markets. Because it contains an essential amount of financial markets, pip moves during these hours tend to be more considerable.
During these hours, currency movement also occurs the most between banks since France, Germany, and the rest of the Eurozone are active at this time.
- New York Market
New York and London have a few hours of overlap with their trading hours. By the time the US market moves, the EU markets are only halfway through their day. Due to the high amount of trading with commodities and the dollar’s status as a safe-haven currency, you should expect to see much volatility during these hours.
The New York Market commands the second-largest share of forex daily trades at 16%, though it’s essential to keep in mind that most of these trades happen during the London overlap. Currencies trading against the Euro will mostly move during this overlap. In contrast, the day’s overall trades from the Tokyo/Sydney markets will be most visible during the later hours.
Try trading in the different trading sessions to see the difference for yourself. You can play around at no risk using a free demo account from Blueberry Markets by clicking here. You can have up to $50,000 in seed funds to practice trading for 30 days. Our customer support team will be at hand to help you with any concerns.