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The most common question traders have is: when should I trade? When is the ideal time of day to trade? Read on to find out when is the ideal time to invest. To help you determine this let’s first learn about the various sessions that are held throughout the trading day.

When the market is active, which is when you’ll get the narrowest spreads and the best chance of closing a trade at the levels you want, is the ideal time to invest in forex. Since more traders are buying and selling each currency during the times when the market hours overlap between trading sessions, this is typically the most active period on the forex market.

However, depending on the currency pair you’re looking at, there may be a better time for you to invest in forex. If both markets are accessible at the same time, the sessions for each FX pair will typically overlap and have the highest liquidity. For example, when both the London and New York sessions are open, there will be more trading activity in GBP/USD.

It’s also critical to understand that increased volatility is a direct result of increased investing activity and it is always important to have a risk management plan in place.

Trading sessions

In the world of forex, time is key. On weekdays, the forex market is open 24 hours a day allowing traders to potentially trade throughout the day and all night. However, this does not imply that you should invest in forex assets all day or at any time. Because there are various forex sessions throughout the day, volatility fluctuates throughout the day. It’s critical to comprehend the various forex trading sessions to determine the optimal trading times and forex assets.

For an investor, understanding the forex market’s investing hours is crucial. You must be aware of the four main trading sessions and the times that the forex market opens and closes.

It’s not always a good idea to invest in the markets just because you can do so whenever you want to. When the market is active and many forex traders are opening and closing positions, resulting in a high volume of trades, that is the ideal time to invest. 

The Sydney, Tokyo, London, and New York sessions are the four main forex sessions for the forex market.

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Forex market hours

As already discussed, the four primary trading sessions for the forex market are the Sydney, Tokyo, London, and New York sessions. In the past, there have been three peak investing sessions in the forex market.

Traders tend to concentrate on one of the three trading windows instead of trying to invest all day. This is referred to as the “three-session forex system.” The Asian, European, and North American sessions, also known as the Tokyo, London, and New York sessions, make up these sessions.

The start of the new calendar day is traditionally marked by the International Dateline.

Due to its status as a major financial center, New Zealand’s forex markets open on Monday morning, even though most of the world still observes Sunday.

Trading takes place in New Zealand, but it’s still referred to as the Sydney session. The market never officially closes during the week until Friday, though there is a brief downturn in activity while the majority of American traders leave for home and the majority of New Zealand and Aussie traders are getting themselves ready for work, between roughly 19:00 and 22:00 GMT.

There are only two public holidays, Christmas and New Year’s Day, when the whole forex market remains closed aside from weekends.

Trading volume in Forex

Trading entails the possibility of generating revenue both during up and down market movements. However, attempting to do so when the market is unchanging will be extremely challenging.

The market requires a large number of trades to move. For that reason, you ought to concentrate your efforts during particular trading sessions.

Named after significant financial centers, the forex trading sessions are partially displayed after the local “work day” of traders based in those cities. The market is more active and the trading volume rises with the number of traders.

The spreads and slippage you encounter will be tighter and less frequent in an active market. You’ll experience improved order execution, to put it briefly.

Forex trading software displaying a platform with a clock, enabling trade during specific hours.

What time of day is ideal for trading forex?

Even though there are times during the week when the market is extremely quiet and trading volume is low, there is always at least one open forex session.

You, the investor, will have to decide when is the best time to invest. Your trading style, your time zone, or your availability. For example, the Asian trading session will work well for you if you want to target a small number of stocks in a low-volatility environment. However, trading at the very beginning of the New York session or throughout the London session is the best option if you want significant price movements and high volatility.

The ideal assets for you to trade will also depend on your time zone and availability. For example, you could potentially be more successful trading EUR and GBP pairs if you had the opportunity to trade during the London session.

Generally speaking, you should wait for trading sessions to overlap rather than trading when there is just one open investing session.

There are significantly more traders actively buying and selling a particular currency when two significant financial centers are open.

Financial centers examples:

  • The New York and London exchanges are open from 1 to 4 p.m. (GMT).
  • The Tokyo and Sydney exchanges are open from 12 a.m. to 7 a.m. (GMT).
  • Both the Tokyo and London exchanges are open from 8 to 9 a.m. (GMT).

When the trading sessions in New York and London overlap, there is the greatest trading volume. These two financial centers account for more than half of trading volume.

Depending on the currency pair you want to trade, there will be a best time for you to trade forex.

When the investing sessions of each of the currencies overlap, that is when the majority of trading activity for a given currency pair takes place and there’s enough volatility low spreads, and good liquidity for trading a variety of assets.

For example, when both the Sydney and Tokyo sessions are open, there will be more trading activity for AUD/JPY. Additionally, when the London and New York sessions are both open, there will be more trading activity in EUR/USD.

A person trading forex on a laptop using a trading platform, with a clock in the background.

Overlapping trading sessions

Usually, there is a window of time when two sessions are open simultaneously in between each forex session.

For instance, in the summer, the Tokyo and London sessions overlap from 3:00 to 4:00 AM ET. Additionally, the London and New York sessions overlap from 8:00 AM to 12:00 PM ET in the summer and winter. Since there is more volume whenever two different markets open at the same time, these are naturally the busiest times of the trading day.

This makes sense because there is a greater exchange of money during those periods since all market participants are making transactions.

Final thoughts

Naturally, the suggestions regarding the ideal hours to trade are generalizations. There are many deviations and exceptions, based on shifting market conditions and news events. However, scholarly research indicates that any market timing patterns that allow for the regular generation of unexpected profits are typically brief since traders and investors quickly take advantage of these opportunities and the financial markets become more effective as a result of increased awareness of the patterns.

Disclaimer: This material is for general informational and educational purposes only and should not be considered investment advice or an investment recommendation. T4Trade is not responsible for any data provided by third parties referenced or hyperlinked in this communication.

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