Best Currency Trading Hours explained by professional forex trading experts the “ForexSQ” FX trading team, All you need to know about Best FX Trading Hours.
The Best FX Trading Hours
The best time to trade on the Forex (Foreign Exchange) is when the market is most active. When more traders are active, trading spreads — the difference between the bid price and the asking price — tend to narrow. The result is that less of your money goes to the market maker — the specialist who trades the currency in question — and more to the buyer and seller.
The 4 Major Forex Exchanges
Active trading markets are almost always better for traders, whether you are trading on the Forex, the NYSE or any other financial trading market.
But for Forex traders, there’s another good reason for trading when the market is most active: volatility. As a result of the nature of the Foreign Exchange’s four major exchanges — New York, London, Singapore, and Tokyo — when more than one exchange is open, not only does trading volume increase, but volatility significantly increases as well. Although investors often fear volatile markets, volatility — the extent and rate at which an equity or currency price changes — is good for traders. Without volatility, prices remain constant and trading cannot be profitable. With volatility comes risk, but also opportunity.
Worldwide Forex Markets Hours
The Forex has fifteen independent exchanges worldwide. All are open five days weekly, from Monday through Friday. Each exchange has unique trading hours, but from a trading perspective, the four most important exchanges and their hours are the following (all times are Eastern Standard Time):
- London: 3 AM to 12 PM (noon)
- New York: 8 AM to 5 PM
- Singapore: 3 PM to 12 AM (midnight)
- Tokyo: 7 PM to 4 AM
Currency Trading Hour Overlaps
While each exchange is independent of the other, they are all trading the same currencies. This means that when two of these four large exchanges are open, the number of traders actively buying and selling currencies increases significantly.
Bids and asks on one Forex exchange are immediately reflected in the bids and asks on any other open exchange, which both reduces market spreads and increases volatility.
When you look at the exchange hours listed above, it becomes clear that trading hours on major exchanges occur in two markets simultaneously from:
8 AM to 12 PM (noon) EST, when both New York and London exchanges are open
3 PM to 5 PM, when both New York and Singapore exchanges are open
7 PM to 12 AM (midnight) EST, when both Tokyo and Sydney exchanges are open
3 AM to 4 AM EST, when both Tokyo and London exchanges are open
The Best Currency Trading Hours
These four overlaps are normally the three best times to trade. Of these, the most favorable trading time is the 8 AM to noon overlap when both New York and London exchanges are open. These two trading centers account for more than 50 percent of all trades on all 15 exchanges worldwide.
Special situations can arise, however, that can make any hour of the day or night a favorable trading time. Normally, for example, from 5 PM to 6 PM EST is not a promising time to trade; the only major open exchange is the Singapore exchange, which accounts for less than 10 percent of annual Forex trading volume.
If, however, there was a political or military crisis anywhere in the world that developed during this hour, volatility and trading volume would predictably spike in response, making this a very favorable time to trade.
“Best” Doesn’t Mean “Profitable”
If you’re just beginning to trade on the Forex, it’s a good idea to proceed cautiously. Currency trades are highly leveraged — sometimes as much as 1,000 to 1. This makes the idea of a big win appealing, but also means you can lose most of your money on a single trade. A 2014 Citibank study concluded that although 84 percent of Forex retail traders believe they can make money, only 30 percent break even or better.
It’s often a good idea to open your Forex account at a firm that offers new investors “demo” trading, where the results are tallied but the gains and losses are imaginary.
Once you see how you’re doing in your demo account, you’ll know better how to proceed.