Best Times To Trade Forex Market
In this lesson we will explain to traders when is the best times to trade the forex market. The main forex trading session, and the Asian session. We will also pinpoint when the most optimal trading opportunities occur.
As a forex trader you know that the forex market is open 24 hours. In this article we will provide more exact times to be in front of the computer to maximize potential for price movement and how to efficiently monitor the forex market for trades. Traders will be able to know the best times times for the most possible pip potential. We will also outline some guidelines for trading outside of the main trading session, and when volatile news drivers can drive more movement. Forex trading hours are Sunday evening to Friday afternoon, USA time. There are two major forex trading sessions, the Asian session and the combined European and American Session, which we will refer to as the main session.
Best Time To Trade Forex - Main Trading Session
The above image illustrates when the various equity markets around the world are open in relation to the main trading session. The Sydney and Tokyo equity markets represent and overlap the Asian session forex times. The London stock market and New York stock exchange hours overlap the main trading session. We have heard some confusing terminology form traders like London session forex time or New York session forex times. The main trading session overlaps both of these. The main trading session is roughly a 5 hour window of time starting about 4 hours before the US stock market open until about 1 hour afterward. This is the best times to enter forex trades.
Example of how to locate the main forex trading session in your time zone:
In central time zone USA, the New York stock market opens at 8:30 am, so the main session would be at 4:30 a.m until about 9:30 a.m. for your best time to trade forex and trade entry points.
Example Number 2:
In eastern time zone USA, the New York market opens at 9:30 a.m so the main session would be from 5:30 a.m. to 10:30 a.m. for your best time to trade forex and trade entry points.
These are the best forex trading times for trade entries, in the main session. If you live in a different time zone around the world just take this same logic and apply it to your time zone. You need to know when the New York Stock Exchange opens in your time zone to estimate when the main session is in your particular time zone. In some cases EUR, GBP and CHF news drivers occur ahead of the main session and these news items on the economic news calendar are also just fine for driving possible trade entries.
Look at the illustration below. The peaks of the chart represent the market volatility and participation in the Asian session versus the main session. Most of the activity and market participation is in the main trading session times on the right. This is because all markets are open in the main session: commodities markets, futures markets, options exchanges, and European and US equity markets are all open at the same time.
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About 80 to 90% of the activity in the spot forex market occurs in the main trading session. Roughly the same percentage of good sustainable trade entry points occur in the main session. A sustainable entry is defined as a movement that is 75 to 100 pips or more, and gives you the freedom to close out some lots and manage your money well while riding the remaining lots if the pair is trending. Or you could close out the trade completely if you are in a non-trending or choppy market. For more information about trade entries we have a great illustrated article that discusses more criteria on how to enter forex trades.
Due to the higher market participation and liquidity, movements are much stronger during this time. Trade volumes and liquidity are much higher when compared to the Asian market times. Sustainable trade entries might occur every day 5 days per week in the main session. If you trade in the direction of the H4 time frame or higher trends, you can generally hold on to most entries if you get a good entry signal from our heatmap tool. Which is discussed below.
Currencies That Can Move In The Main Forex Session
All 8 currencies we track can move in the main trading session. The USD, CAD, EUR, GBP, CHF, JPY, AUD and NZD all can have strong movements across 28 pairs. Trade entries can be verified with our excellent real time trade entry management system, The Forex Heatmap®.
In the example above, the GBP weakness is driving the market in this trading session. If this is a new movement on the EUR/GBP or GBP/CHF after a consolidation period, you likely have a valid entry. The movement could also start after a GBP news driver on the news calendar. Entering fresh movements that start in the main forex session, after a consolidation cycle, will ensure a high level of success. During and immediately around this critical 5 hour window of time for trade entries, there are a lot of news items on the world economic calendar that you can also monitor.
Because of the high liquidity and market participation in the main trading session, traders should consider breakouts, any new movement cycles, trend continuation on the higher time frames, or even day trading. The extra liquidity facilitates more flexbility for traders during this trading session.
Sometimes the EUR, GBP or CHF pairs start moving just ahead of the main forex session. Generally speaking it is okay to trade these pairs, especially if there is some news or strong sentiment driving the movement. Always check the forex news calendar for specific news drivers and exact times when news is scheduled for these currencies. Pips are possible on 28 currency pairs, including the EUR/USD, every day in this trading session.
Best Times To Trade Forex In The Asian Session
Trading in the Asian trading session is not advised at all for new forex traders. For the most part the volatility is too low for any good, sustainable trades. Remember, a sustainable entry is defined as a movement that is 75 to 100 pips or more. A good sustainable trade entry in the entry in the Asian market times occurs roughly once per 8-10 days, or about 3 times per calendar month. The rest of the time you would just be scalping or trades of a duration of about 1 hour or less. So the risk/reward ratio is too low most of the time.
An exception would be after important AUD, NZD, or JPY news drivers on the forex news calendar. See the examples below denoted in red. There are some important news drivers coming in this session at pre-specified times. News drivers like unemployment rates and GDP can drive price movement. So these times might be good for potential trades in this session. This happens a few times per month.
There is one other situation where it might be possible to trade in this session. This would be the case where a new trend cycle is starting on the H4 time frames or higher or a breakout of support or resistance on one of the higher time frames occured in this session. Traders can set up these free forex trend indicators to track when new trends start on all 28 pairs we follow.
New traders need to avoid this session completely, then after about six months to one year of successful entries in the main session, trading in this session will bring you additional pips. By then you will have enough experience watching the market to know when and how to trade in this trading session. Is it possible to make pips in the Asian session?? Yes, absolutely it is. But the correct news and trend setups do not occur but a few times per month. The rest of the time the movements in this session are too small to trade with a good potential reward. In this session, traders would mostly focus on the NZD, AUD and JPY pairs due to their geographic location.
Other Tools For Trading in Both Forex Trading Sessions
Forexearlywarning has a great tool for validating trade entries in eithertrading session. It is called The Forex Heatmap®. In the main trading session, the heatmap can be used to validate trade entries across 28 pairs and 8 currencies. The heatmap can also be used in the Asian trading session to validate trades taken during that session. The heatmap has two separate sets of readings and is broken down by trading session.
Here is an example of the heatmap signals plus our trend indicators. In the news calendar example above, you can use a strong heatmap signal to trade in the Asian session after the NZD GDP news driver highlighted in yellow. The NZD news comes out, then the NZD starts to weaken. Then various trades are possible like selling the NZD/USD or NZD/JPY.
The heatmap is arranged the same way the forex trading sessions. One heatmap is for trading all 8 currencies in the Asian trading session, and there is a separate heatmap for trading in the main trading session, very logical.
Conculsions - The best time to trade the forex market is in the main trading session. Some trades can also be done during the Asian session. Asian session trades occur much less frequently and much more strict entry rules must be used. The forex market is, in fact a 24 hour market, but traders can zoom in on the best times for trading and limit their time in front of the computer while maximizing potential to make pips. Just follow the guidelines in this article and use the tools we give you for the most efficient use of your time, and maxmizing pip totals.