The world of forex trading is a truly global one with the major markets spread across multiple countries. This means that the forex market works around the clock and, as a trader or even someone following it closely, need to adapt to this complexity. As a trader, more so, knowing what are the best forex trading hours is not just helpful but essential.
Major Forex Exchanges
While there are many forex markets or exchanges worldwide, the major ones are based in New York, London, Tokyo and Sydney. Technically, there is no centralised exchange and the transactions happen over the counter with the involvement of financial institutions. A network of banks and forex brokers and traders comprise the global forex market.
In such a global setting spanning multiple time zones, trading can be quite complex and challenging for traders operating across multiple currency pairs. An experienced forex trader needs to balance the trading hours of all the exchanges simultaneously. He should be aware of the opening and closing hours across these markets. There would be times when the working hours of multiple exchanges create hours of volatility.
Significance of Time Zones in Forex Trading
The global context of forex markets and their prevalence across continents make time zones an important aspect of forex trading. The simultaneous operations of various forex markets have their own complications.
A trader dealing with multiple currencies and markets might need to be active and involved throughout the day. From the time Tokyo and Sydney begin operations to London opening later and finally New York session opening last, the forex trader has a long day’s job.
There are obviously overlaps across exchanges and the different time zones and their working time impacts forex pairs significantly. Unlike stocks, the pairing of anyone trading on the London market on the EUR/USD or GBP/USD counters is likely to see enhanced action once New York begins the day.
The Impact of Overlaps in Forex Trading Timings
It is these overlaps that make the market volatile and yet offer the best opportunities for forex trading. These windows can impact the price movements and open possibilities of the highs and lows more than when one of the markets is closed.
Here is a closer look at the various markets and the overlap timings across them.
The 2 am to 4 am window here is less volatile as compared to the New York/London overlap. The currency pair that is most active is EUR/JPY and the opportunity here is to exploit pip fluctuations that can be high during this period.
The 3 am to 4 am overlap is much less passive with the least occurrences of major pip fluctuations. This is due to the US session not being up yet and the absence of enough traders in the market.
The 8 am to 12 noon slot is when the markets get into overdrive mode. The US market is up and London is also actively trading and this overlap sees the maximum volatility. Given that the USD and the EUR, the most popular and heaviest traded currencies now in full swing, this overlap sees up to 70% of all trades happening. There are price swings and traders see this window as the best to cash in on.
Forex trading – Opening hours
The forex markets hours of operation depends on which of the four forex trading sessions you are trading in. Traders will also have to keep in mind the Daylight Saving Time in their region to calculate the market hours correctly.
New York is one of the most important global financial centres and the US dollar is a huge bulk of all the currency trades and is thus carefully watched by investors.
The New York session opens at 8 am and closes at 5 pm EST (1 pm to 10 pm UTC). The best currency pairs to trade during the New York session include EUR/USD, USD/JPY, GBP/USD, EUR/JPY, GBP/JPY, and USD/CHF.
Japan, closely follows New York in the third position. The opening of the Tokyo session marks the start of currency trading in Asia; the other major financial centres in Asia being Singapore and Hong Kong.
The Tokyo session opens at 7 pm and closes at 4 am EST (12 am to 9 am UTC). The Yen is the third most traded currency, and the best currency pairs to trade during the Tokyo session include USD/JPY, GBP/CHF and GBP/JPY.
The Sydney session is closer to the Asian time zone and so the Australian and Asian sessions overlap.
The Sydney session opens at 5 pm and closes at 2 am EST (10 pm to 7 am UTC). The best currency pairs to trade during the Sydney session include USD/JPY, AUD/JPY, NZD/USD, and EUR/AUD.
The London session is one of the most liquid trading sessions. The GBP is one of the most heavily traded currencies in the forex market.
The London session opens at 3 am and closes at 12 pm EST (8 am to 4 pm UTC). The best currency pairs to trade during the London session include GBP/USD, EUR/CHF, USD/CHF, and GBP/JPY.
Most Important Forex Trading Hours
The round the clock nature of forex trading translates to a long week for the forex market. A trader in the US would need to start a week before it begins! Technically, the forex market opens by 5 pm EST on Sunday and the week only comes to a close by 5 pm EST on Friday.
Of course, long as the week is, a typical trading day would not see action all day long. The most important trading hours in a day are the hours when at least two of the markets are open. During the time when only one market is operational, it is usually calmer and the pip spreads thin at about a variance of 30 pips. But as soon as a second or more markets are functional simultaneously, there can be surges with up to 70 pips and above.
The Best Forex Trading Hours
The best times of the day to trade are a combination of when more than one exchange is open. Here is a listing of the best times to trade.
- 8 am to 12 noon. This is when both London and New York exchanges are open.
- 7 pm to 2 am. This is when Tokyo and Sydney exchanges are open.
- 3 am to 4 am. This is when Tokyo and London exchanges are open.
As is evident from above, the best window is between 8 am and noon EST as the two biggest exchanges – New York and London – are open and active. Half of all forex trades that are done originate from these two centres. The window when the forex market is at its most sluggish, relatively, is between 5 pm to 6 pm EST when New York and London are not functional at the same time.
There can be exceptions to these in the event of a news breakout of a sudden and important nature as a political or economic development, military activity and any such event.
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