Knowing The Best Times For Currency Trading!
Learn Forex Nitty Gritty. Get these Forex Scalping Cheatsheets FREE. Learn this 10 minute a day Swing Trading Strategy. Many new traders get confused by the continous action in the currency market. Currency markets are open round the clock for 24 hours from Monday to Friday and close only during the weekend. This is totally different from the way the stock market works. So those who have been trading stocks when switch to forex get confused and can’t figure out what is the best time for currency trading.
Stock markets have fixed hours. NYSE is open for trading from 9:00 AM EST to 4:30 PM EST. You can only trade stocks on NYSE during this time. The best way to divide the 24 hours forex market is to divide it into three trading session based on the three locations from where forex gets traded heavily.
The first most important trading session in the currency market is the Asian Trading Session. It starts from 7:00 PM EST to 4:00 AM EST. Tokyo is the center of this session followed by Singapore, Hong Kong and Sydney. Most of the transaction that take place during this time involve the Japanese Yen as major import and export order require currency changing. So the heavily traded currency pairs during this time are JPYUSD, JPYGBP and JPYAUD. For those traders who trade the JPY, this is the time to be active in front of their computers.
The most important trading session that takes place in the 24 hour currency market day is the European Session with London as it’s center. The European Sessions starts from 2:00 AM EST and ends at 12:00 PM EST. London is the center of the global currency market with roughly like 30% of the total daily currency transactions originating from London. This is the session that sets market mood for the rest of the day. Major moves usually start and end during this time. Liquidity and volatility is high during this time. There is a trading strategy known as the London Rush Hour that uses this time to make maximum pips. The currency pairs that get heavily traded during this time are EURUSD, GBPUSD, CHFUSD, CHFEUR, JPYUSD and JPYGBP. If you trade one of these currency pairs then you should monitor this session carefully as a major move might get started any time requiring you to change your stops.
The second most important trading session is the US Session that runs from 8:00 AM EST to 5:00 PM EST. New York is the second most important currency center in the world. Major investment banks, corporations, hedge funds and institutional investors have their offices located in New York. The other main center during this trading session is Chicago. Large currency transactions involving USD either as a base currency or counter currency take place during this session. These transactions have the potential of moving and shaking the global currency market. The currency pairs heavily traded during this time are UERUSD, GBPUSD, CHFUSD and CADUSD.
Now, after knowing these three different currency centers and the trading sessions based on them, you must have observed that some overlapping between these three trading session does take place. Yes, it does. The two most important trading sessions namely the US and the European Sessions overlap from 8:00 AM EST to 12:00 PM EST. This is time when the currency market is most active. Volatility is high and large currency transactions almost close to 70% of the total daily volume takes place during this time. This is the time for those traders looking for volatility in the market to become active as ranges become wide and pip making potential increases. Whatever happens during this time of the day can leave it’s impact for the rest of the day or for that matter rest of the week or even month.
Now, you must have also oberved that the European Session and the Asian Session overlaps from 2:00 AM EST to 4:00 AM EST. During this time, there is not much activity as the European market is still preparing to start it’s trading day while the Asian market is winding up it’s trading day. So during these two hours the currency market is mostly trying to consolidate what has happened during the Asian Session with no major move usually taking place. Sometime, an odd late hour large transaction may get the market moving again but such transactions are rare and no one can predict them.
As a trader what you need to do is break the 24 hours into three 8 hours session. Further break these 8 hours into 4 hour session and try to time these 4 hour sessions with the above trading sessions that match with the currency pair that you want to trade most!
