The Forex market is an open market and operates for 24 hours and this enables the trader to trade for several hours. Nevertheless, not all these hours are thought to be of the similar value. Day parts are also important when choosing a pair because some of the time span is more conducive to making money because of high liquidity and flucuation. It is crucial for you to know when to open your trades in Forex so that to have the highest possible returns with low risks. Below is a thread that will be very helpful in determining when it is best to trade Forex.
The Role of Overlap of Markets
One common aspect that has to be looked at while determining when to trade is the issue of market overlap. The Forex market is divided into four major trading sessions: Sydney , Tokyo London and New York. The greatest trading opportunities are realized during the cross-Decoration periods for the reason that this is the flow era of trading volume and trading range.
The majority of overlap occurs between the London and New York sessions, and this will take place between 14:00 and 18:00 GMT. In this period both the European and American markets are functioning hence the liquidity and the spreads narrows. This particular overlap is particularly good for trading the majors which include the EUR/USD, GBP/USD and USD/JPY.
The London Session: 3:00 AM to 12:00 PM of Every Eastern Standard Time.
Thus, it is quite evident that the London session is the most active and the most liquid session of the Forex market. It starts working from 3:00 AM EST to 12:00 PM EST. This is also the time that European financial markets are the most active and most foreign exchange transactions are made. This session is normally hold in the evening, and traders always look forward to this sessions, as it may overlap with New York session.
These include high and unstable price fluctuation, which tend to be realised during the trading session in London. If traders wish to have a session filled with many trading sessions and lots of volatility, then the London session is perfect for them.
The New York Session: Monday through Friday 8am-5pm EST
This session is that of New York, and business in this session begins at 8:00 AM in Eastern Standard Time and closes at 5:00 PM, same time. It is even more active than the second most active session which is London. It is also convenient for the trader since the sessions of London and New York overlap from 08.00-12.00 PM EST; this is also considered as the period providing the highest liquidity and the highest fluctuations in prices.
Meat of the news, both from the U. S. and Canada, is released during New York session, and tightens quantity commanded through currencies’ prices. This means that the New York session is very appropriate for trading the U. S. dollar and most of the other currencies in the major pairs.
The Asian Session: 7:00 PM /4:00 AM est
The Asian session that consists of the Tokyo market is between 7:00 PM and 4:00 AM Eastern Standard Time. Similar to the New York, this session tends to exhibit less fluctuations as compared to the London and New York sessions. Nevertheless, it is not completely devoid of trading opportunities, especially trading in such currency pairs as USD/JPY and AUD/USD.
The Sydney Session: The retaining wall and construction work are done only from 5:00 PM to 2:00 AM of the Eastern Standard Time.
The first market session in the week is Sydney and this overlaps for a short time with the Tokyo market. It operates from 5:00 pm until 2:00 am of the Eastern Standard Time. Although it is less volatile compared to the other three sessions, it is not devoid of trades especially for those trading on AUD/NZD currency pair.
Conclusion
Thus, it is critical to state that the best times to trade Forex are contingent on one’s trading strategy and the preferred currency pairs. The overlaps between the markets especially those between the London and New York sessions provide high levels of liquidity and volatility thus serving most traders best. Therefore, if you want to increase your chances of success in the Forex market, then it is about time you discover the best time to trade based on the dynamics of each session.
[…] Forex Trading has become very popular in Pakistan and offers great opportunities to make high revenues. Nevertheless, it has many negative consequences that may result in huge losses, if controlled improperly. This paper therefore seeks to evaluate how the following risks could be managed to enhance long-term success irrespective of one’s experience level in the highly unpredictable forex market. Here are some important points that must be followed to control risks in forex trading in Pakistan. […]