With Forex markets open almost all the time how can you decide when it is best to trade? The most lucrative times are those where different financial centres overlap as more active traders increase liquidity and therefore profit. Read on to understand when are the best times to trade Forex.
Forex traders should be aware the markets are open 24 hours a day, 5 days a week making it convenient to trade at any time. But you cannot trade every hour the markets are open as you’d be exhausted! So how do you select which period is most lucrative?
The Forex market is open so long as it covers the regular business hours of four different parts of the world for their respective time zones. Liquidity increases when most traders are active in the market, increasing bids and pushing turnovers, so the most popular times are the most lucrative.
There are four main sessions of the Forex market: London, New York, Sydney and Tokyo.
London: 7am – 4PM GMT
The London Forex market serves the UK and Europe and is the largest currency market in the world. This market aligns with European trade and often sets trends that technical traders can track to get ahead in other markets. For example, analysing how the London market performs informs what trends are likely to occur during New York market trading hours.
New York: 12PM – 9PM GMT
New York, US is the second largest foreign exchange market. Movements in the NYSE can severely affect the dollar as mergers and acquisitions are finalised during trading hours.
Tokyo: 11PM – 8AM GMT
Tokyo, Japan is the first market to open in Asia and handles most Asian trading, followed by Hong Kong and Singapore. The USD/JPY currency pair sees a lot of movement when the Tokyo market is open due to the Bank of Japan’s influence on the market.
Sydney: 10AM – 7AM GMT
Although Sydney, Australia is the smallest of the great Forex markets it is particularly good to trade when they open on Monday morning (Aus time) as all the movement in other markets on Friday needs to be caught up on considering Sydney market closes the earliest at the end of the previous week.
Best time of day
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New York Close
The busiest times are when sessions overlap as traders can then buy from multiple continents. The London market is the most active as it encaptures the EU, then follows the US market and then Tokyo. When the London and US markets overlap (peak at 2PM GMT or 10AM EST) is the best time to trade as the London market is closing and the US market is opening up. This overlapping period creates big swings in currency prices giving the best opportunity for profit.
Liquidity is at an optimum level around midday to 4PM GMT as the two largest financial centres are active (London and New York). Here you will see the biggest moves in the Forex market due to news reports in Northern America and late news updates from Europe. There is a point at the end of the overlap however, that might be better to avoid. When European traders start closing positions at the end of their day, there can be some big jumps in Europe-based and US currency pairs.
Best day of the week
The greatest price movement in the four main currency pairs (EUR/USD, GBP/USD, USD/JPY, USD/CHF) are in the mid week. Tuesdays and Wednesdays are the best days to trade Forex because there is higher volatility. Additionally, Fridays before 12AM (GMT) are extremely busy, but after midday try to avoid trading Forex as this is when the major traders start closing positions ahead of the weekend.
The worst time to trade Forex is when markets are unpredictable. It is best to avoid Friday afternoon, weekends, closing sessions, bank holidays or when major economic reports are released.
If you want to trade Forex, try practising with the BullBear app to get the hang of it.