What is the best time to trade the forex market?
Unlike stocks that are only open for trading for few hours, Forex market is open 24hrs
a day, but not really.
Forex market is open from 5 pm EST on Sunday to 5 pm EST on Friday, but not every trading
hour in this time period are worth trading.
There are times where Forex Market is more active, this is where you can get a very good
reward to risk ratio, and there are times where Forex Markets are simply not worth trading.
Let me explain.
In Sydney Australia, the Forex market officially opens at 5 pm Eastern Standard Time and closes
at 2 am EST.
You can sometimes see some good price movements when this session opens, but most of the time,
the price action is not that good compared to other sessions we are going to see.
In Tokyo Japan, session begins at 7 pm Eastern Standard Time and ends at 4 am EST.
This is where Forex pairs like USD JPY and GBP JPY give a good price movement.
Then there is the London session that starts at 3 am Eastern Standard Time and ends at
12 pm EST, and is one of the preferred sessions by technical traders.
London session is the most active forex session, and is also called the central trading capital
of the world.
Just like the London session, the New York which opens at 8 am and closes at 5 pm, also
gives some great opportunities for traders.
In fact, it is the second largest platform in the world.
In this session.
you can find some really good trading opportunities on the Forex pairs that involve the US dollar.
But why am I talking about these Forex sessions?
Why are they so important?
Well, you see, for price to make big move in your favor and to increase your profit
potential in trading, the Institutional money has to be involved.
When these session open, their respective banks also show interest.
For example, in the London Session, the Britain's central Bank has a heavy impact on the Forex
Market.
Now one can say, that the best time to trade forex, is when the London session or the New
York session is open because they have relatively good price movement.
But if you look at the opening and closing timings of these sessions, you will notice
that there is a overlap.
There are few hours where both London and New York sessions are open.
Since both of these sessions have a high trading interest, you can say that the overlap of
these sessions is the best time to trade.
Lets see an example.
On this chart, you can see how the market is in a range and the volume is low in the
Japan and Sydney Sessions.
But when the London session starts, you can spot the increase in volume.
Even the price movement is a lot better than the previous session.
When the New York session opens, you can see the volume rising even more.
During the overlap of the London and New York sessions, you can see how price made a very
big move.
And if you compare this movement with the Asian Session movement, you can easily tell
that the price action during the overlap is much better, and give some of the best trading
opportunities.
But how can you actually use this information to enter trades?
Obviously, not everyone is going to find the London and US overlap time suitable for trading,
because everyone most likely lives in different corner of the world.
If you can't trade during the US and London overlap, which is from 8 am Eastern Standard
Time to 12 pm EST, you can trade in the Sydney and Tokyo overlap hours.
Most of the time this period is not that volatile compared to US and London, but it still gives
some decent trading opportunities.
The worst overlap among the 3, is the London and Tokyo overlap.
You will rarely see a high volume price action in this period, and because this overlap is
only 1 hour long, many traders will not participate.
But if you can participate during the US and London overlap hours, make sure you look out
for any upcoming news.
Price can make a huge sudden move in one direction when there is a big news release.
Since price action gets volatile during the overlap hours and in the London session, you
should probably plan your stoploss ahead of time.
When the price starts making sudden moves, you don't want your stoploss to be taken out.
If you set your stoploss by taking the price volatility into consideration, when a new
session starts, don't make the mistake of setting your stoploss using the volatility
of the previous session.
It is good idea to wait and analyze the movement of the new session.
For example, if you set your stoploss considering the volatility at the end of the Asian session,
there is high chance your stoploss will be taken out if the volatility rises in the London
session.
If you don't know how to use the price volatility to set your stoploss, you can use the ATR
indicator.
I have already made a video about it, check it out to know more about the ATR stoploss
and how it can be better.
Some say news trading can also be very profitable in forex, but in reality, predicting the price
direction before a news release is a difficult task to do, and new traders should probably
avoid it, but not completely.
For example, if there is a big news that has the potential to increase the volatility,
you should wait for the first few sudden moves, and take advantage of the high volume price
action that will follow for a while.
Unemployment rates, Central Bank meetings, and interest rates are few examples of news
events that can give a decent trading opportunities.
Overall, the best time to trade the Forex market and to find some of the best trading
opportunities, is during the overlap of the London and New York sessions.
If you can't take trades during the overlap, the London session can be the next best one,
followed by the New York session.
If possible, you should aim to take most of your trades during the overlap of the forex
sessions, and when the price is more volatile.
Otherwise the price will stay flat and you will be stuck in a trade for a long period
of time.
You should also be careful while trading in the New York session, as there can be a late
news release from the previous sessions.
These unexpected price movement can turn your profit into a loss.
Furthermore, it is a good idea to avoid taking trades at the very start and at the very end
of a forex session, that's because traders from the previous session could be exiting
the trades, this can sometime lead to a noisy price action at the start of the next session.
You can even trade in session overlap hours only, this way you will only take trades when
there is a movement in the market, and trading only for few hours will also avoid you from
over trading, which in other words, will avoid you from blowing up your account.
And If you find it confusing to convert your local time to find the timing of the Overlap
sessions, you can change the time zone on your charting platform to use the New York
time, or the Eastern Standard Time.
All the Forex market hours mentioned in this video were in Eastern Standard time as well.
So that's all.
Now you know a bit more about trading.
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Check out other trading strategy videos on the Trading Rush channel.
And if you find this video helpful, you will find the 5 steps trading strategy video helpful
as well.
In that video, I show how you can filter bad forex pairs, and take trades on quality setups
using 5 proper steps.
Thanks a lot for watching.