Forex market is open for 24 hours 5 days a week. This is a really long period of time as it is a sleepless market. For traders, it is really exciting, for they have the opportunity to multiply their profits anytime they desire.
However, just like a traditional market, it’s not always crowded. There are times when it’s so full of traders and there are also times when you can count them with just one hand. That’s how the knowledge of market hours and timing becomes important as you can adjust your trading strategy better so that it suits the market hours and timing, therefore brings you maximum profit.
First of all, we need to know that in forex trading, the market hour is divided into several main trading sessions, which are Sydney Session (Australia), Tokyo Session (Asia), London Session (Europe), and New York Session (America). As we all know, there is a pretty big time difference between Australia and America (+16 hours), resulting the forex market opens all the time as at least one of the markets is still open when the others are closed.
Tokyo Trading Session
Widely known as Asia Market, since Tokyo is the Asian trading center, this session has approximately 21% of the trade share a day with Japanese Yen as its favorite currency traded. Not only Japan, but other strong economy powers, such as Hongkong, Singapore, Australia, and South Korea, are also actively involved in transactions. Similar to China, Japan is an exporting country, leading to Bank of Japan not becoming the sole foreign exchange trader, since China and commercial companies also actively trade.
At certain times, liquidity could be considerably low which could be seen when the price movement is slightly low (price does not change for a fairly long period). Such condition could lead to the forming of breakout level from the previous trend occurs in American Market which results to a consolidation phase of a pair. Most of major movements occurs earlier in the session as it is generally the time where fundamental economy news is being released. Tokyo Market is likely to have an impact on the next markets session, since traders in Europe and America would observe what was happening in Tokyo Session.
Pairs that are quite interesting to trade in this session would be Japanese Yen and Australian Dollars. Considering that China has grown into new economy power, those pairs would likely to receive a significant impact by the time China releases important news.
Europe/London Trading Session
Europe Market has the biggest trade share with approximately 36% of all transactions. Europe Trading Session is where the transaction highly occurs as thousands of “big bosses” throughout the world put themselves in.
This session has some characteristic. Firstly, as it overlaps other markets, it makes this session exceptionally crowded. It also leads to a high liquidity and volatility and low pips spreads. Secondly, trend that occurs during this session mostly would keep its track until the beginning of New York Trading Session. Thirdly, the volatility would be low at noon during the lunch time, waiting for the New York Trading Session to open. Some important news in Europe would also affect the price movement.
During this session, all pair would usually become interesting because of the number of traders involved. However, the tightest pairs would still be the major pairs, such as EUR/USD, GBP/USD, USD/JPY, and USD/CHF.
Market Hour (GMT)
New York Trading Session
This market takes around 19% of the trade share. New York is the center of trade and business in America. This city is also widely known as “The City That Never Sleeps”. We also know that US Dollars is the world currency as it is involved in nearly 90% of the world trade.
This session also has certain characteristics. Firstly, it has high liquidity because of its overlapping on London Trading Session. Secondly, when the US government release important news, prices in the market would be significantly affected, since most of the world trade involves US Dollars in it. Thirdly, after the London Trading Session is closed, the liquidity and volatility would tend to lower (during mid day in America). Fourthly, on Friday, transactions would reduce as Asian and European traders are no longer active on the weekend. Finally, trend reversals could possibly occur after the afternoon session in America. It is caused by traders unwilling to keep an open position to avoid unwanted events triggered by releases of news during weekend. Just like in Europe, every pair would be good to trade in this session but a full attention should be given because when important news is about to be released, price of US Dollars would usually move wildly.
General characteristics of each session have been discussed. Now let us proceed to pair’s characteristics on certain day so that a full picture would be gotten and timing of transaction could be well decided.
Below is pips movement of each pair on each day:
It can be seen that Wednesday, Thursday, and Friday are the busiest days. So, the best time for forex trading would be in London Trading Session on Wednesday, Thursday, and Friday because it is the busiest time and the overlapping period would provide high liquidity and volatility and higher chances to gain profit in shortest time possible.
When is the worst time to trade?
For aggresive traders, Asian Market would not give the best satisfaction due to its low volatility and liquidity. Saturday is also not recommended because it is time when the market is closing (after afternoon session in America). Finally, when world major events are happening, such as FIFA World Cup, the market would tend to be quiet as traders’ attention would be distracted.