Education & Training Forex Trade1

Forex Trading Sessions

Just because you can trade the market any time of the day or night doesn’t necessarily mean that you should.

The best time to trade is when the market is active with lots of forex traders opening and closing positions, which creates a large volume of trades.

The forex market can be broken up into four major trading sessions: the Sydney session, the Tokyo session, the London session, and the New York session.

IMPORTANT POINT

  • Four major foreign exchange markets in London, New York, Sydney, and Tokyo have different trading hours.
  • Traders can benefit from knowing when the trading hours overlap.
  • During overlapping forex market hours, volatility tends to increase.

Forex Trading Volume

You can make money trading when the market moves up, and you can even make money when the market moves down. But you will have a very difficult time trying to make money when the market doesn’t move at all.

In order for the market to move, lots of trades need to occur. And this is why you should focus your energy during specific trading sessions.

The forex trading sessions are named after major financial centers and are loosely based on the local “work day” of traders working in those cities.

The more traders…trading, the higher the trading volume, and the more active the market.

The more active the market, the tighter the spreads you’ll get and the less slippage you’ll experience. In a nutshell, you’ll get better order execution.

What time should you trade forex?

An effective time to trade forex is when the market is most active, so when the greatest volume of trades occur at one time. Such a climate offers high liquidity and tighter spreads. Therefore, the most optimal time to trade is during overlaps between open markets. The heaviest overlap is between the London and New York sessions.

During this time, there is also high volatility, so despite there being a tighter spread initially, major economic news announcements could cause the spread to widen. However, high volatility can be favourable when trading in the forex market. See our guide on risk management for more on managing volatile markets.

The London session is also the busiest market of them all, particularly in the middle of the week. Trading on a Friday, however, offers lower volatility with fewer people trading, making liquidity lower. It’s also dependent on what currency pair you’re trading, for example, trading on JPY would be more apt during the Asian session. Practise trading on currencies through a spread betting or CFD trading demo account.

Sydney is open from 9:00 pm to 6:00 am UTC
Tokyo is open from 12:00 am to 9:00 am UTC
London is open from 7:00 am to 4:00 pm UTC
New York is open from 1:00 pm to 10:00 pm UTC

How to Trade with the Forex Market Time Zone Converter

Here are some tips for using the Forex Market Time Zone Converter:

  • Concentrate your trading activity during the trading hours for the three busiest trading sessions: Tokyo, London, and New York.
  • Most market activity will occur when one of these three markets open.
  • The most active times will occur when two or more trading sessions overlap and are open at the same time.

What are the most volatile currency pairs?

Volatility is dependent on the liquidity of the currency pair and is shown by how much the price moves over a period of time. This impacts the spread, with the price movement being depicted by the number of pips. There will be pairs which naturally have higher volatility, but numerous factors can come into play which can cause pairs to become more volatile. Forex market hours can have an effect on the volatility of a forex pair at certain points throughout the day, either increasing or reducing volatility.

Some of the most volatile forex pairs are:

  • AUD/JPY
  • NZD/JPY
  • AUD/USD
  • GBP/AUD

Major currency pairs tend to have lower volatility compared with the exotic pairs, as when there is high liquidity, there tends to be lower volatility. Currency pairs from more developed countries tend to have lower volatility as prices are typically more stable. There is also lower supply and demand for currencies from emerging markets. Read more about the most traded currency pairs​ around the world.

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