Determining the best forex trading hours can be tricky, since there are a lot of factors to consider. Consider that forex is not traded in a central exchange, like stocks, but across three major trading sessions (four if you count Sydney). What is important to note about the operating hours of these trading sessions is that there are periods of overlap, during which there is a greater volume of trading and thus, greater opportunities for finding winning trades. Let’s examine these periods of overlap:
- Asian-London overlap: Asian and European trading sessions overlap at several times during their trading days. Generally, the Tokyo, Singapore and Hong Kong markets overlap with London and Frankfurt from 2 am to 3 am EST, during which the Japanese yen experiences the highest liquidity. However, the Frankfurt market, which opens at 2 am, and the London market, which opens at 3 am, overlaps with Hong Kong and Singapore, which are open until 5 am. During these forex trading hours, the most actively traded currency pairs are those in which the Japanese yen is the quote currency, i.e. USD/JPY and the EUR/JPY. However, liquidity during this period is generally thin since trading during the Asian session has slowed down by the afternoon while European traders are just starting their trading day.
- Europe-North America overlap: This is considered the key trading period by traders since they involve the major trading centers, London and New York, which overlap from 8 am to 11 am EST. The most heavily traded currency pairs during this period are those involving the major European currencies, such as the Swiss franc and UK pound as well as the Euro. Currency pairs in which the US dollar is the quote currency are also among the most actively traded, i.e. GBP/USD and EUR/USD. In addition, it should also be noted that most news releases come out during New York trading hours.
- Australia-Asia overlap: New Zealand and Australia are the first currency markets to open and their forex trading hours overlap with those of major Asian forex bourses such as Tokyo, Hong Kong and Singapore. The period of overlap with the most liquidity is from 9pm to midnight EST, as Australia and New Zealand are open along with Hong Kong, Singapore and Tokyo. The most actively traded currency pairs are those in which the Australian and New Zealand dollars are the base currency, i.e. AUD/JPY, AUD/USD, NZD/JPY and NZD/USD. Specific periods of overlap are Sydney and Wellington with Tokyo starting at 7 pm and with Hong Kong and Singapore from 9 pm until 12 midnight.
Aside from knowing the busiest forex trading hours, you should also know the best trading days. Generally, Tuesdays to Thursdays are when most trading in the forex markets happen, with the EUR/USD, EUR/JPY, GBP/JPY and GBP/USD currency pairs enjoying the highest average pip range. The worst day to trade is, of course, Friday, particularly after lunch unless some breaking forex news causes volatility in the markets. Apart from overlap times, European trading sessions are the best time to trade, since they tend to be the busiest among the major sessions.