All trading involves risk. Losses can exceed deposits.

When is the best time of the day to trade forex?

We take a look at how FX traders need to take into account the time of day, and what varies from session to session. 

All trading involves risk. Losses can exceed deposits.
Big Ben
Source: Bloomberg

Forex traders need price movement to make profits, whether that movement occurs over the course of one day, several days, or even several weeks. Intraday traders need volatility within the trading day itself so, by definition, FX traders that are looking to open and close trades within one session need this movement.

The day in forex is broken up into several sessions. The first of these is the Asia-Pacific session, from around 10pm to 7am the following day. Australia begins the trading, followed by Japan (which makes up the biggest slice of volume in the Asian session), and then joined by Hong Kong and Singapore. Then comes Europe, with London as the biggest player. Finally, at midday, the US begins to enter the fray, and then by around 9pm, things will begin to wind down before the whole show begins again a few hours later.

The beginning of each trading session is when the big institutions, such as investment banks, are active, and this is often when relevant economic data for each session is published. So, for example, the UK’s major data releases come out at 9.30am, while the US tends to publish its numbers from 12.30pm, until about 3.30pm. These announcements can generate significant volatility in and of themselves, so every forex trader needs to know when they are published. IG provides an economic calendar, and highlights some of the bigger releases on the Week Ahead page.

Some forex pairs will be more heavily affected by the overlap than others. For example, EUR/USD and GBP/USD will see plenty of activity as New York gets into its stride, when London is still fully active too. It pays to be aware of this, even if it doesn’t usually mean a trader has to alter his entire approach.

Of course, it is not surprising to say that each forex pair is most active when at least one of its markets is open. For example, USD/JPY will be busiest during the Asian and US sessions, but less so in Europe. EUR/USD will not be quite as busy during the Asian session, and so on. Whichever pair you trade, regardless of whether it is one of the biggest and busiest, or one of the more ‘exotic’ ones, it is important firstly to know which pieces of data are being published today, and secondly which sessions are likely to be the most volatile. Traders can then look to trade within either the volatile or quiet periods, with both approaches having their own merits and disadvantages.

As with so many other things in trading, there is no one ‘perfect’, or ‘best’ time to trade forex, but there will be times that are perhaps better than others, or times that will suit a particular trading style better. Learning this will require trial and error, but it is one of those necessary learning curves that cannot be bypassed.

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