Which Trading Session to Choose?
This lesson will cover the following
- Most suitable hours, usually chosen by investors in order to trade
The best time to enter the Forex market depends on the strategy which each trader chooses to follow. Scalpers and other intraday traders score their biggest profits while large volumes of currencies are being traded since then they can take full advantage of Forex benefits. In contrast, traders who prefer to buy and hold currency pairs in the long-term, while ignoring intraday and day-to-day price spikes, prefer to enter positions during periods of low volatility.
Aim at larger volume hours
Since the Forex market is decentralized and open 24 hours a day, the best time for the intraday traders to enter positions is when several countries are trading at the same time, therefore it is of utmost importance to know when Forex market hours in different countries overlap, and especially the major financial centres. The larger the number of countries actively trading is, the greater the trading volume and the wider the price movements will be. And because the majority of traders are presented with a better chance of profiting when currencies are more active, slow markets tend to be avoided.
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The least active time to trade, also called the “dead zone”, is the Asian-European overlap session. Most traders are sleeping during this short period. Trading volume is very thin and trends are unpredictable during this period. Some long term traders prefer to enter the market right here when slippage is less likely to happen. However, long-term traders will most likely not be concerned about market hours, as their positions generally attempt to transcend short-term volatility.
The best hours for trading in the Forex market, in most cases, are during the London and US session overlap. The markets are full of active participants during these hours and the currencies really move. For the most part, even the largest fundamental news come out at these times. Trading during these hours is your best chance to get in while the market is making decisive moves and it will be your best chance to score quick profits.
A very attractive period to trade is from 1am to 3am EST. At that time, Asian markets are closing, overlapping with the waking up European markets, which offers good trade opportunities. The same goes for the 7pm to 10pm EST time period, when the Australian and Asian markets overlap.
A much less desirable time to trade is right after the US markets close during summer time, without overlapping with any other large market. At those hours, the volume of trading is much lower, offering less great trading opportunities.
Which day to choose?
Something else worth considering is that while certain hours of the day are busier than others, price fluctuation varies from day to day as well. Typically, some days of the week are busier than others. As a general rule, price movements for many of the majors tend to be wider towards the middle of the week, with Tuesday and Wednesdays trading sessions having the greatest pip variation for all major currency pairs.
Data release hours
Also a time with high-volatility trading is when important numbers such as the U.S. Non-Farm Payrolls come out. If the actual number differs considerably from the markets consensus expectation, then the exchange rate can shift rapidly to discount the new information as fast as possible. National holidays, such as a UK or US bank holiday, could also change Forex market conditions because without these countries participating, the market volume and liquidity will be a lower than usual.
In the 24-hour Forex market, timing is critical. Choosing the best time to trade is a powerful way to maximize the profit potential of every trade. Professional traders know this secret. They carefully choose the timing of their trades to produce the most profits. You can make this same choice – and maximize your profits on every trade.