Best Hours to Trade Forex for Trading
The best hours to trade Forex 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.
4 Major Forex Exchanges
Active trading markets are always better for traders, whether you are trading on the Forex or any other financial trading market.
But for Forex traders, there is another good reason for trading when the market is most active: volatility. As a result of the nature of 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 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, the 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 for five days weekly, from Monday to Friday. Each exchange has unique trading hours, but from a trading prospect, the four most important exchanges and their hours are the following:
- 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
Forex Trading Hour Overlaps
While each exchange is independent of other, they are all trading the same currencies. It means that when two of these four large exchanges are open, the number of traders actively buying and selling the currencies increases significantly.
Bids and asks on one Forex exchange are quickly reflected in the bids and asks on any other open exchange, which both the reduces market spreads and increases volatility.
When you look at the exchange hours listed above, it becomes obvious that trading hours on major exchanges occur in two markets simultaneously from:
- 8 AM to 12 PM EST when both London and New York 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 London and Tokyo exchanges are open
Best hours to Trade Forex
These four overlaps are the three best hours to trade Forex. 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.
Specific situations can arise. However, that can make any hour of the day or night a favorable trading time.
For example, from 5 PM to 6 PM EST is not a promising time to trade the only major open exchange is Singapore exchange, which accounts for less than 10 percent of the annual Forex trading volume.
If, however, there was a political or military crisis anywhere in the world that developed during the hour, volatility and trading volume would predictably spike in response, making this a very favorable time to trade.