What is the Best Time Frame to Trade Forex?

Any time you go to the beach, day or night, you’ll find the waves keep lapping onto shore. Still, you’ll probably only spot surfers out there at certain times. When, for instance, there is hardly any swell to speak of, they won’t bother paddling into the water for lack of incentive. If a shark warning has been issued, hardly any surfing will be going on for obvious reasons. And in the middle of the night, even when surf is up, most surfers will be lying snugly in bed.

The global currency market, like the ocean tide, doesn’t stop moving at all during the week. This is because it takes place at three major centres on the globe, all of which set their clocks differently. At 10 p.m. GMT (Greenwich Mean Time) on Sunday, things start off in the east with the Sydney session, followed on its heels by the Tokyo session at 12 a.m. Until 9 a.m., traders in this region – including those in China, Russia, Australia, and New Zealand – will be actively exchanging forex pairs, keeping their values in constant flux.

Before the easterners call it quits, at 8 a.m., the London session begins. It’s not only the English who get involved in this session, but also the French, the Germans, the Swiss, and many other nationalities on the European continent. The major financial centres that participate in this session, particularly London itself, make it the busiest session of all, and the one that sparks off most price trends in the well-traded pairs.

Finally, the New York session gets going at 1 p.m., overlapping for a four-hour period with the London session. Participants in this session are physically located all over the USA, Mexico, Canada, and South America. It comes out, then, that, from Sunday night until Friday night, currencies are constantly being bought and sold somewhere in the world.

Like the surfing community, online traders need to establish the best time frame to trade forex. When currency pips are moving only feebly, there may not be enough opportunity to justify your efforts. When a “shark warning” in the form of unpredictable, volatile prices is issued, it may be best to sit on the sidelines until things calm down. And yes, the middle of the night may not be the best time to do your forex trading because you need to sleep.

In this article, we’ll get you up to speed with the key factors you need to bear in mind when setting your forex trading schedule, both with respect to your personal wellbeing and the optimization of your potential earnings.

When Trading Volume is High

At certain times of day, many more forex pairs change hands than at other times. Another way of saying this: Some time periods experience a relatively high trading volume. This makes a difference to forex traders who are trying to plan the best possible entry and exit positions for their pairs. High trading volume means more liquidity in the market, and this implies that the popular pairs will see greater volatility. It also implies you can get tighter spreads on those pairs. A tighter spread means you lose less in broker fees for executing the trade. This reason, together with the heightened volatility, which generates opportunity for big earnings, draws lots of traders to seek out the high-volume periods at the expense of other times.

This accounts for the fact that the most popular time to trade currencies is the overlap period of the London and New York sessions – between 1 p.m. and 5 p.m. – when two major forex centres are open together. Volume also fluctuates based on the time of day, and the day of the week. Monday and Friday tend to see spikes in trading volume, and so do the times immediately after the market opens and soon before it closes. Institutional traders, who make the biggest waves in the forex market, often close off their positions near the end of the day, which brings on that latter spike in volume.

The high-volume periods may not suit every trader’s strategy or temperament. When volatility is at its highest, it becomes more possible to misread the underlying trend that’s going to guide prices in a given direction. Therefore, some traders choose to wait until the volatility dies down somewhat before entering the market. Relatively high volume is desirable even for these traders, though, because it can provide clearer and more powerful trading signals. For instance, if the prices of your pair are in an uptrend and volume is growing, this can make for a great buying opportunity. High volume confirms the fact that buying interest in your pair remains strong, which tells you prices will likely keep rising.

Now, let’s learn what we can about each of the three main forex trading sessions in turn. This will have a bearing, not just on when you decide to trade, but also on the pairs you may want to focus on, and even on the strategy you adopt in approaching the market.

Sessions By Country

The London Session

Forex trading times in London sound most like normal business hours since we take Greenwich time (the same as London time) as our standard: The period extend from 8 a.m. to 5 p.m. This the city that the Bank of England (BOE) calls home, and the BOE sets the dials for the British pound sterling’s monetary policy. It’s also the city in which 43% of the world’s forex trading takes place. As a result, forex trends tend to originate here and spread across the Atlantic when trading opens in New York.

The forex pairs to watch out for during this session are the ones involving European currencies like the British pound, the euro, and the Swiss franc. Examples include EUR/USD, GBP/USD, USD/JPY, and USD/CHF. The dollar pairs among these get special attention in the overlap period with New York. A big reason why these pairs see surging volume during the overlap are the interbank transfers that take place between the two cities during that time.

With respect to strategy, forex traders know that the best time to expect prices to break through support and resistance levels is during the London session. The rush of liquidity makes it much more likely prices will leave behind the ranges in which they had been stuck and surge to new levels. Thus, when prices for the EUR/USD break out into a bull run, with trading volume looking robust, there are solid grounds to buy the pair.

The New York Session    

From 1 p.m. to 10 p.m. GMT, citizens of the Americas do their forex trading. London’s status may be pre-eminent, but New York’s is nothing to sniff at. This session is also well populated in the currency trading community, one reason for this being the ubiquity of the US dollar in trading action. Nine out of every ten forex transactions involve the USD. The New York Stock Exchange, which is open simultaneously with this session, exerts a heavy impact on the dollar pairs. Thus, forex traders in the New York session would do well to glance at the world of stocks while they’re preparing to take a position in the market.

The pairs to focus on in this session include USD/JPY, EUR/USD, GBP/USD, and USD/CHF. As to the question of strategy, traders are aware that New York can, at times, exhibit the kind of dynamism needed for a breakout strategy (trading in the direction prices break out from a range, given the fact that volume is high) in the same way that London does. On the other hand, the New York session can sometimes look a lot calmer than London, resembling more the Tokyo session. Most volatility in New York can be expected at the beginning of the session, rather than later on.

The Tokyo and Sydney Sessions

As we mentioned, Sydney gets the privilege of kicking off the forex trading day. Their session runs from 10 p.m. to 7 a.m. GMT, but Tokyo runs just a little bit behind, trading from 12 a.m. to 9 a.m. There is, then, a long overlap between these two sessions that traders can take advantage of.

Forex pairs don’t normally charge through their established ranges in the Asian sessions, at least not in the way they do in the London session, so breakout strategies are less appropriate. Take note, however, of the overlap of the Tokyo session with the London session from 8 to 9 a.m., which gives key currency pairs a shot of adrenaline. Keep your eye on USD/JPY, EUR/USD, AUD/USD, and especially GBP/USD during the overlap period. When only Tokyo is active, the pair to watch is USD/JPY.

When determining the best time for forex trading in India, remember that Japan is three-and-a-half hours ahead of India, irrespective of the month of the year. Neither Japan nor India observes daylight saving times (DST) , which essentially means “assigning the respective location to one time zone further east”, in the words of the National Library of Medicine. But, for countries that do observe DST, be alert to changes in the clock occurring in the months of March, April, October, and November.

Summing Up the Best Times to Trade Forex

Pip movement in your favourite currency pairs isn’t only determined by the overlaps of forex trading times. Central bank announcements, data releases, and media hype have the power to turn a tranquil trading session into a wild ride no one had anticipated. For instance, on July 31st, 2024, when the Bank of Japan announced it would hike interest rates, carry traders (who borrow the yen to buy higher-yielding assets) were convinced to unwind their positions. In strengthening the yen against the dollar, this caused billions of dollars to be lost on the forex market.

Certainly, though, being aware of the operating times of the three major forex trading centres is vital to any effective trading strategy. With a bit of practice, you can integrate this information into your own strategy and, in so doing, sensitize yourself to the pulse of the currency markets to great effect.