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

6 Min Read
Last Updated April 5th 2021

Everyone knows that the forex market is open 24 hours a day. While this makes it an attractive option, it is impossible to trade for all 24 hours. Also, the fact that certain markets are open at certain times and others at different times; sometimes there won’t be enough volatility to spread the cost.

However, the US Dollar Japanese Yen (USD/JPY) trade sessions see certain hours that are acceptable for day trading with enough volatility to generate profits to cover the cost.

But most day traders don’t wish to trade during the acceptable hours. Instead, they wish to trade during the best hours of the day. For this, it is important to be aware and informed and focus on the specific hours when the largest intraday moves happen. It means you need not trade throughout the day, but only during specific hours where there are enough volatility and volume to justify the cost and to generate enough profits.

Activity Through Trading Sessions Around the Globe

Time zone difference is the reason why the forex market is always open for business during the week. Australian and Asian markets open first, followed by the European markets. The North American market is the last to open.

There are four main forex markets in the world – Sydney, Tokyo, London, and New York. All four markets operate in different time zones, which facilitate a lot of global action and trade. As one or the other of the market is always open, you’ll find that some traders, banks, or businesses are usually willing to trade around the clock.

However, it is important to understand that not every global market actively trades every currency pair. The volume and activity of trade differ depending on the pairs you choose, as well as the time of the day you trade.

For instance, when London is open for trade, the pairs that include the euro (EUR), British pound (GBP), and Swiss franc (CHF) are much more actively traded. However, when the New York session is open, forex pairs that include the U.S. dollar (USD) and Canadian dollar (CAD) are more actively traded.  

USD/JPY Pairing

When you consider the above factor, you might find the USD/JPY pairing a bit odd. Although the Japanese Yen and the U.S. dollar are highly traded currencies, this pair rarely sees any instability throughout the day, barring a few peaks and troughs in volatility. Also, these two markets don’t see any crossover as Tokyo would have closed for the day - long before the New York sessions open. That doesn’t mean you cannot trade in these pairs. In fact, the Asian trading session is considered one of the best times of the day to trade.

As mentioned earlier, different markets operate at different time zones. So, you have the following working hours (all times in EST):

  • Sydney 3 pm to 12 am 
  • Tokyo 7 pm to 4 am 
  • London 3 am to 11 am 
  • New York 8 am to 5 pm 

In this context, it is important to note that there would be some changes on account of the daylight-saving time. During the warmer months, the trading hours for New York and London move forward by an hour. It would be better to check the market hours tool for exact information because clocks go back and forth on different dates in Europe and America.  

Times to Avoid Tading the USD/JPY

As mentioned elsewhere, the USD/JPY pair doesn’t see much volatility and the price movement is relatively stable throughout the day. There would be periods with noticeable drops in volatility. You should stay away from day-trading during these low-volatility phases because the pip movements may not be large enough to offset the cost of the spread and/or commissions you'll pay.

Usually, this pair sees subdued trade between 17:00 EST and Tokyo opening time of 20:00 EST. It is not an ideal period for day-trading. Likewise, the currency pair sees a dip in volatility as Tokyo winds down its action and before London starts its operations. This period is also best avoided if you are dealing in USD/JPY pair.

Of course, the average daily volatility changes over time. But these hours of low volatility typically don’t change and hence it is important to stay away from trading the pair at these times. You can estimate the ideal times during the day – and check if there is unusually high or low volatility by referring to the volatility charts and statistics. These are available online and you can easily avail the information with a few clicks.

You can also find how many pips a forex pair moves during a typical day. For this, all you have to do is put in an average true range (ATR) indicator to the daily chart. If you set the ATR to 15, it will show the average daily volatility for the last 15 days.

Ideal Times to Day Trade the USD/JPY Pair

Now that you know when you shouldn’t trade, it brings us to the important question, when should you trade? The ideal scenario to trade the USD/JPY pair is between 08:00 and 11:00 EST. Both London and New York sessions will be open for this period. Even though Tokyo won’t be open at this time, this three-hour window offers the biggest price moves of the day. In rare cases, volatility remains high for another hour or so, offering a four-hour window. It means greater profit potential, with the spreads also typically being the tightest during this time.

Conclusion

It is clear that the best time for day-trade USD/JPY is between 08:00 and 11:00 EST. It maximises your efficiency and chances of making a profit. This is also the best window to deploy trading capital because the increased volatility offers you more opportunities to trade.

Having said that it is important to point out that there is no ideal or perfect time on the forex market that one can make the right call. Occasionally, other times can also produce decent size moves – for weeks or months at a time.

It is important that you check the volatility statistics and observe what time of the day they are most active. As the USD/JPY pair is one that is actively traded around the clock, there could be some other times where you can take advantage of.

Also, if, despite everything you are unable to trade during the most active times in the USD/JPY pair, then perhaps you should look at trading other currency pairs. The EUR/USD, GBP/USD, or the AUD/JPY might offer great opportunities for you.

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