The Best Time To Day Trade The GBP/USD Forex Pair

Last Updated July 23rd 2021

6 Min Read

The forex market can be a round the clock arena with trading happening almost all day long. That still does not mean it is possible to make the most of trading any time of the day. For each forex pair, there is a best time to day trade and that is equally true for the GBP/USD pair as well.

In fact, the GBP/USD pair is one of the most popular and busier forex pair and also the oldest. Its history dates back to the 19th century when physical cables stretched across the Atlantic Ocean were used to telegraphically communicate. Thus, “trading the cable” came to refer to trades between the GBP and the USD.

Why Day Trade GBP/USD?

Why should a trader day trade the GBP/USD currency pair? Let us take a look at some of the main reasons

Volatility

There is a wider price range with GBP/USD compared to other currency pairs which lead to higher spread quotes. If you want to actively day trade, you need to focus on a trading pair with the lowest spread as a percentage of maximum pip potential.

The GBP/USD is one currency pair that exhibits the best ratio. However, if you are trading outside of these hours, the pip movement may not be large enough to compensate for the spread.

Safe bet

Being the currencies from two of the major economies in the world, there are many ways to find price information and data affecting the GBP/USD pair.

Diverse trading vehicles

Being the third most traded currency pair, the GBP/USD pair is one of the most liquid currency pairs available. The GBP/USD pair comprises of around 14% of the total daily trading volume and a wide range of trading vehicles is available for day traders.

Manoeuvrability

There are a large number of pips in a single move for the GBP/USD pair when compared to other major pairs. This makes it ideal for breakout trading.

Availability of resources

Success in forex trading comes from having the right predictions, forecasts, resources, tools and strategies. With the availability of resources, it is easier to analyse the various graphs, charts and data.

As for turnover, this pair is only surpassed by the EUR/USD and USD/JPY in its share of the overall forex market business. In terms of liquidity too, the GBP/USD ranks high.

Just like there is an optimal time to trade for each currency pair, there is one for the GBP/USD as well.

Day Trading The GBP/USD

Even with the forex market being considered a 24-hour arena, it is when a currency’s own exchange is open for business that it gets traded actively. But when the markets for both the currency pairs are simultaneously open, the business for the pair is at its most active.

Let us take an example to illustrate the point: Once the London forex market opens for business, any pair that involves the GBP sees an increase in trading action.

Likewise, once New York opens for business, any pair that involves the USD witnesses an increase in trading numbers. But for both the GBP and USD, when the London and the New York forex markets are simultaneously open for business, this pair sees the maximum trading activity.

The Best Time To Day Trade The GBP/USD

The Asian markets open early and trading is already underway quite early in the day. Both the British pound and the US Dollar and, specifically, the GBP/USD pair do evoke interest and see action right from the beginning. What transpired towards the end of the previous day’s trading in the US market and after the opening of the Asian market on the next day has a bearing even before the London market’s trading begins.

The hour or two just before the European market opens sees the trading start ticking based on how the Asian market is shaping up or on the back of any development in the respective regions, i.e., in the UK or in the US.

But it is at the time of the London exchange opening – at 8 am GMT or 3 am EST – which the GBP/USD volumes start to seriously warm up. Between 3 am EST and 4 am EST, after the London exchange has open and seen some initial action, the traders watch the market to take their positions.

For such a busy counter, the volume is generally high enough to make successful trades and get profits even after accounting for operational costs like cover spreads and commissions.

But once the New York market also opens up, there is an increased activity that is seen in the pair. The real action, however, is between 8 am EST and 12 pm EST during the overlap period between the simultaneous sessions of both the London and New York markets.

This is when the frenzied activity from both exchanges creates volatility and a spurt in volumes traded. The turnover for the GBP/USD pair is at its highest and the potential to make profits also at its maximum. With low spreads, traders find this the best time to trade between the pound sterling and the US dollar.

Other Factors To Consider While Trading GBP/USD

Apart from the technicals, there are many other factors that can sway the forex market. The GBP/USD is no exception and is even more prone to volatility on account of news and developments arising from a myriad of global and local events. The most contributing factors are economic and political related and, given the significance of both the United States and Great Britain, any development in either nation can affect the forex markets.

Geopolitical events like Brexit and the US elections have the potential to create serious ramifications in the financial markets and cause volatility in the currency market.

Similarly, events around the world – ranging from the Middle East crisis, change in economic policy by another nation, natural disasters, among others – can create flutters and spikes in the forex rates.

Even while adhering to the best times to day trade the GBP/USD, being aware of global cues and factoring them into your forex trading strategies is an absolute must for any successful forex trader.

With nearly 88% of all forex business involving the USD and the GBP’s reputation as one of the most liquid currencies, this pair needs to be taken seriously.