Best Currency Pairs To Trade At Night

Last Updated July 23rd 2021
7 Min Read

It is common knowledge that the forex market is a 24-hour market. An over-the-counter market to trade currencies, it offers some of the best opportunities to trade at night. However, before we get into the details, it is necessary to understand the concept of trading at night.

Depending on where you are, night trading can be done in any of the three major currency markets namely Asia, North America, and Europe. As a vast majority of currency trade, around 80%, occurs on the European and North American markets, night trading usually happens in the Asian markets.

Currency traders based in Asia sometimes refer to themselves as night traders even if they trade during the day in their home country. This is because globally, the hours between the closing of the US market and opening of the European markets is known as the after-hours or night session.

Forex Night Trading Hours

To understand this better, let us take the case of a trader in the UK.

In the UK, night trading would refer to trading that takes place on Asian markets during the period between the close of US markets and the re-opening of European markets. It would mean that the trade would take place between 10 pm and 7 am BST. (Note that this would slightly change when the clocks change during autumn).

Best Currency Pairs To Trade At Night

When it comes to night trading, you must have an idea about the best currency pairs to trade at night. The general principle while trading currencies is to choose a currency where the market is active at the time.

For instance, if you are trading in the Tokyo currency market, you should choose a pair that has Japanese Yen. USD/JPY, AUD/JPY, or GBP/JPY would be some of the currency pairs you can consider. The key is to look at the pairs that might not be active during daytime trading.

Here are some of the best currency pairs you can choose to trade at night

AUD/NZD

AUD/NZD currency pair is an exciting choice as both currencies are interrelated with commodity prices. Because of their geography, for economic success, both Australia and New Zealand are heavily dependent on China which purchases their commodities.

However, they are seldom viewed in the same light. So, if you choose to trade in the AUD/NZD pair, you should monitor global commodity prices along with the intergovernmental relations and trade figures between both these countries and China.

AUD/JPY

AUD/JPY currency pair offers a considerable degree of volatility in night trade. The yen is intricately connected to the US economy. Many Japanese companies provide products and services to the US market. The yen typically moves in the same direction as the USD.

Australian economy is based on commodities and is heavily influenced by Chinese economic data in addition to the USD. This makes this pair an interesting choice for night trade.

USD/JPY

Some might find the USD/JPY pairing a bit odd. Even though the Japanese Yen and the U.S. dollar are highly traded, this pair seldom sees any movement throughout the day.

That makes this the ideal pair for night trade. As such the ideal time to trade USD/JPY is between 08:00 and 11:00 EST. As both London and New York sessions will be open for this period, it offers the biggest price moves. It translates into greater profit potential, with tighter spreads during this time.

EUR/USD

Normally, when a forex market is open for business, currency pairs that involve the native currency are more actively traded.

So, if you are trading the EUR/USD pair, the best time to trade is when both markets are open. So, even though the EUR/USD is an excellent pair for a day trade, it is not an attractive choice for night trade. 

Why Trade Forex At Night?

That brings us to the obvious question – why should you trade at night? Well, there are several reasons why night trading is beneficial. Some of the currency pairs best suited for night trade might have a smaller margin requirement than the currency pairs traded during the day.

For instance, pairs such as the NZD/JPY require a smaller margin than some other pairs such as the USD/GBP. Furthermore, the NZD/JPY pair is much more active at night.

Another reason to opt for night trade is the fact that strategies involving capitalising on small price movements (scalping and automatic trading programs) do better in the Asian markets. As the activity is less, the chance of missing a trade on a small fluctuation is also low.

Furthermore, those looking for longer-term strategies are likely to benefit from early entry through night trade.

For instance, If there is an upcoming economic announcement from the USA that might have a significant effect on a currency pair it would be first felt during night trading. In such a case, the trader can enjoy the first-mover advantage by trading on Asian markets the night before the announcement.

Read Also: The Best Forex Trading Hours

How To Choose The Best Currency Pairs To Trade At Night?

We have already looked at some of the currency pairs suited for night trade. However, the choice comes down to an individual trader’s risk tolerance and the strategy used. Trading forex at night is an excellent opportunity for both short-term gains and long-term investment.  

If you are a beginner, it is better to choose major pairs to trade at night. These are less active and less volatile at night as they do not involve an Asian currency. So, for a beginner, it will make more sense to trade in pairs such as the GBP/USD or USD/CAD.

Even experienced traders can use these currency pairs for night trade by employing strategies such as scalping. Any strategy that works well with less volatility – scalping, automatic trading programs, etc. are suited for night trade.

Strategies that work better with less volatility, such as scalping or automatic trading programs, will tend to favour night trading.

If you are looking for volatility, then the best pairs to choose would be the cross-pairs that involve an Asian or Oceanic currency. So, the pairs such as the AUD/NZD, AUD/JPY, or NZD/JPY are best suited for night trading in such a scenario.

Another point in favour of night trade is that it allows profiting from the retracement of any gains or losses accumulated in the US and European markets.

It is normal to see a pullback of any large movements during night trading. So, if the EUR/USD pair ended close to the resistance level on the US session, there is likely to be a correction in the Asian markets overnight.

Check Out: Top 10 Forex Pairs To Trade

Conclusion

The general rule for night trade is that Asian forex markets are less volatile than European and North American ones. Major economic announcements in the larger Asian economies like China might have a major impact on multiple currency pairs involved in night trade.

You should also remember that forex platforms will have larger buy-to-sell spreads on most currency pairs during the night. This is because of the lower liquidity levels resulting from lower transaction volumes.

Regardless of whether you choose to trade at night or daytime, the forex market is highly liquid and volatile. You should venture into it with adequate preparation.

Do your research on the currency pairs you wish to trade at night and observe the market thoroughly to learn more. With adequate preparations, you can successfully trade at night. 

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