The forex market is open 24 hours a day, 7 days a week, 365 days a year.
This means that you can trade in the forex market any time of day or night. This makes it an excellent place to trade frequently and make a lot of money.
However, it also means that the market is very active all the time. This makes it almost impossible to trade during market hours. We’ll explain when the forex market is active and why. Plus, we’ll let you know how you can take advantage of the market’s 24-hour trading session.
What is Forex Trading?
Forex trading is when a trader buys a currency and sells a different one, and the exchange range fluctuates according to the demand and supply. The trade for currencies takes place in the foreign exchange market that is open from Monday to Friday.
The Foreign exchange market is open 24 hours a day. All currencies are traded over the counter (OTC), which means there are no physical exchanges, and a worldwide network of financial institutions and banks oversee the operations. As a result, the vast majority of trading in the market is between institutional traders.
The Risks of Forex Trading
Forex traders require leverage, and traders will also use margin, so there are risks involved. Currency prices fluctuate but not by a huge margin, so traders often need leverage to execute a trade. If the trader makes a winning bet, the leverage can help maximize the profits.
However, the leverage can also increase the losses. If the value of a specific currency falls significantly, traders that rely on leverage open themselves up to margin calls, which can force them to sell off their securities. Other than losses, transaction costs can also reduce the profit.
To become a successful Forex trader, you need to be skilled and extremely sharp, as there are many obstacles, and the risk of fraud and misinformation is high.
The Best Time to Trade in Forex?
Due to today daylight saving, the schedule of trading session changes depending on the month:
- Summers ( April to October)
- Winters (October to April)
Summers
- Asian trading session starts at 6 PM and ends at 3 AM Eastern Daylight Time (EDT)
- London trading session starts at 3 AM and ends at noon Eastern Daylight Time (EDT)
- New York trading session starts at 8 AM and ends at 5 PM Eastern Daylight Time (EDT)
Winters
- Asian trading session starts at 6 PM and ends at 3 AM Eastern Daylight Time (EDT)
- London trading session starts at 3 AM and ends at noon Eastern Daylight Time (EDT)
- New York trading session starts at 8 AM and ends at 5 PM Eastern Daylight Time (EDT)
Best Day to Trade Forex?
The best time to trade Forex is within the trading sessions and the best days for trading Forex usually are Tuesday, Wednesday, and Thursday. Across all currency pairings, the volatility rises during these three days.
Best time of the day to Invest in the Forex Market?
The best time to invest in the Forex market depends on the currency pairings that you are trading. Some currency pairings are traded heavily at different times during the day, depending on which countries are open. Below we will discuss the best time of the day to trade the most popular currency pairings:
- EUR/USD
- GBP/USD
- USD/JPY
- USD/CAD
- AUD/USD
- NZD/USD
- USD/CHF
- EUR/JPY
Best time of the day to trade EUR/USD, USD/CHF & GBP/USD
The EUR/USD currency pairing is most active between 0700 and 1600 GMT; while this is the overall active time, the pairing is also greatly active between 1200 and 1500 GMT. The GBP/USD currency pairing is most active between 0700 and 1600 GMT and between 1200 and 1500 GMT and 0700 to 0900 GMT.
The USD/CHF currency pairing is active between 0700 and 1700 GMT and from 1200 to 1700 GMT.
Best time of the day to trade USD/JPY
Japanese and American markets open at different times during the day. As a result, the USD/JPY currency pairing is active from 1200 to 1700 GMT.
Best time of the day to trade USD/CAD
Canada is geographically situated above the United States, so the market in these countries opens up simultaneously. The best time to trade this currency pairing is from 1200 to 1700 GMT.
Best time of the day to trade AUD/NZD and NZD/USD
Like Canada and the United States, Australia and New Zealand are neighbors and also share economic similarities.
The markets open simultaneously in both countries, and the Best time to trade the AUD/NZD and NZD/USD currency pairings is 0600 to 0800 GMT, 1200 to 1700 GMT, and 2100 to 0200 GMT. These two pairing experience high volatility from midnight to 0200 GMT.
Best Time of the day to trade EUR/JPY
The EUR/JPY currency pairing is active a few times during the day, at 0700 to 1800 GMT; the pairing experiences increased volatility and is most active at 0700 to 1000 GMT and 1200 to 1700 GMT.
Four Important Forex Trading Sessions
The Forex market is open 24 hours, but that does not mean that you can trade whenever you feel like and traders are not present at their terminals at all times. The trading is divided into several trading sessions, and they are as follows:
- New York Trading Session
- Sydney Trading Session
- London Trading Session
- Tokyo Trading Session
Asian Trading Session (Tokyo, Japan)
Time: 11 PM GMT to 8 AM GMT
In this trading session, the following countries begin their session of trading:
- Russia
- New Zealand
- Australia
- China
At the beginning of the week (Monday), the traders begin their activities. As a result, the Asian trading session is the 3rd most active trading session globally and contributes 16 % to Forex.
European Trading Session (London, England, UK)
Time: 7 AM GMT to 4 PM GMT
In this trading session, the following countries begin their session of trading:
- United Kingdom
- France
- Germany
The timings between this session and its Asian counterpart overlap, which leads to a spurt in the Forex trading volume orders. The European trading session is the most active Forex trading session and has high volatility. This trading session contributes 43 % to the daily Forex volume.
Every big bank in the world has an office in London because it is a major place for Forex trading.
North American Trading Session (New York, New York, USA)
Time: 12 PM GMT to 8 PM GMT
The North American trading session is dominated by the United States, like New York City is considered a hub for financial activities. This is the 2nd most active Forex trading session behind the European session and adds 17 % volume to the Forex market daily. In total, the American and European sessions make up 60 % of the daily Forex volume.
Importance of the Forex Trading Sessions
Any authority does not create this session; they are specific periods when trading is most active. There are questions regarding which session is the best, and frankly speaking, there isn’t a consistent answer as its unique characteristics define each session.
All we know is that Forex trading begins daily in the Asian market, and during these sessions, the volume and liquidity rise. The Asian session is not as volatile as the European session. In this session, the following currencies are more commonly traded:
- Japanese Yen
- New Zealand Dollar
- Australian Dollar
As the trading session in Asia draws to a close, the trading session in Europe commences. The session in Europe is the most active globally, so traders keep a close eye on it. The ending of the session in Europe overlaps with the American session, and around this time, almost all traders in the world are active, and the volatility is extremely high.
During the European and American trading sessions, are currency pairings are actively traded. When the American session is closing, the liquidity and volatility also decrease. There is also a gap between the close of the American session and the opening of the Asian session, and very few trading activities occur in this gap.
The Top Forex Currency Pairs
| # | CURRENCY PAIRING | VOLUME % |
| 1 | EUR/USD | 27.95% |
| 2 | USD/JPY | 13.34% |
| 3 | GBP/USD | 11.27% |
| 4 | AUD/USD | 6.37% |
| 5 | USD/CAD | 5.22% |
| 6 | USD/CHF | 4.63% |
| 7 | NZD/USD | 4.08% |
| 8 | EUR/JPY | 3.93% |
| 9 | GBP/JPY | 3.57% |
| 10 | EUR/GBP | 2.78% |
| 11 | AUD/JPY | 2.73% |
| 12 | EUR/AUD | 1.8% |
| 13 | EUR/CHF | 1.73% |
| 14 | AUD/NZD | 0.96% |
| 15 | NZD/JPY | 0.93% |
| 16 | GBP/AUD | 0.89% |
| 17 | GBP/CAD | 0.81% |
| 18 | EUR/NZD | 0.78% |
| 19 | AUD/CAD | 0.76% |
| 20 | GBP/CHF | 0.73% |
| 21 | AUD/CHF | 0.7% |
| 22 | EUR/CAD | 0.7% |
| 23 | CAD/JPY | 0.67% |
| 24 | GBP/NZD | 0.64% |
| 25 | CAD/CHF | 0.58% |
| 26 | CHF/JPY | 0.57% |
| 27 | NZD/CAD | 0.48% |
| 28 | NZD/CHF | 0.38% |
Five Factors that Affect the Forex Market
The thing that stands out about the Forex market is that it has many various types of traders and trading instruments. Therefore, traders from anywhere in the world have the opportunity to diversify their portfolios by investing in different currency pairings.
Another big advantage that the Forex market has over other markets is that it is operational 24 hours to trade their favorite currency pairing from anywhere and at any time. In addition, the market has over 5.4 trillion US dollars daily, so there are price movements in all currency pairings.
Forex may also use a feature known as ‘Artificial bits of Intelligence’ to make the trading activity automatic. Due to sufficient liquidity in the Forex market, this artificial intelligence strategy works just fine. Let’s now discuss the five key factors that influence the Forex market:
- Interest Rate Decisions
- Political Stability
- Current Account and Terms of Trade
- Inflation Report
- Speculation
How is Forex Traded?
Below we have discussed some important steps that need to be taken before you trade for the First Time:
Select a Currency Pairing
When doing Forex trading, traders exchange currencies, which means they will buy one currency and sell another one. Due to this, traders will always trade currency in pairings. On the other hand, new traders will start by buying and selling the most commonly traded currencies.
Analyzing the Market
For a trader having a proper market, information is the most valuable tool, and if your research skills are not up to the mark, there will be hurdles for you in the future. When traders first start researching, they get several resources from Forex, and traders are supposed to research a specific currency pair.
Traders need to study charts, analyze the data, and keep in touch with economic indicators to better understand the market’s conditions.
Pick your Position
If you have experience trading bonds, stocks, or other financial products, you should be well aware of the market’s direction. However, Forex trading is different because you are buying one currency and at the same time selling another one, and the movements of the market can be speculated.
Buying Position: When in a buying position, a trader believes that the base currency will rise in relation to the quote currency. If you are buying EUR/USD currency pairing, you expect the Euro to strengthen against United States dollar. This also means that EUR is bullish and USD is bearish.
Selling Position: When in a selling position, a trader believes that the base currency will fall in relation to the quote currency. For example, if the trader is selling EUR/USD, the Euro will weaken against the United States dollar, so in this case, the EUR is bullish, whereas the USD is bullish.
Conclusion
The Forex trading market is a lot more complex than it looks; you need to follow it carefully to be a successful trader. In this article, we have discussed all the information regarding the best time to trade in Forex. Make sure you trade during the trading sessions, as that is when traders are most active.