In Forex, time is money, literally. The forex market is open 24 hours a day during weekdays, but this does not necessarily mean that you should trade forex assets at any time, or all day. Volatility varies during different times of the day because of different forex trading sessions. To establish the best times to trade as well as the best forex assets to trade, it is important to understand the different forex trading sessions.
There are generally four main trading sessions: the Sydney session, Tokyo session, London Session, and the New York session. Both the Sydney and Tokyo sessions are customarily referred to as Asian sessions. This is why Forex is usually referred to as the 3-session market: Asian, London, and New York.
Here are the different characteristics of different trading sessions:
The Asian session starts with the Sydney market opening at 2200hrs GMT. Although it is referred to as Sydney open, it is actually the time when the New Zealand financial markets open. The Asian session runs up to the Tokyo close at 0800hrs GMT. The Asian session is usually characterized by thin liquidity, with most pairs generally trading within a range. The low liquidity also means that currency pairs are generally traded with relatively wider spreads. Most activity during the Asian session happens during the early hours when relevant economic news releases are scheduled. The best currencies to trade during the Asian session include the Japanese yen, Australian dollar, and New Zealand dollar. Forex traders should also watch out for news releases from central banks and statistics agencies in Australia, New Zealand, and Japan.
The London session opens at 0800hrs GMT, just as the Tokyo session closes. This is the biggest forex trading session, accounting for over 32% of all activity. London is a major global financial hub and is used as the reference for all major European financial centres. The London session closes at 1600hrs GMT. The London session is characterized by massive liquidity and high volatility. Many currency pairs make their biggest price moves during the London session. Most price advances and reversals happen during this session. The high liquidity also means that most currency pairs are traded with relatively thin spreads. The euro and pound sterling pairs are the best currencies to trade during the London session. Traders should also watch out for news from the European Central Bank and Bank of England, as well as important economic indicators from statistics agencies of the EU and countries such as Germany, the UK, France, and Italy.
New York/North American Session
The New York session opens at 1300hrs GMT, while the London session is still running. The New Session closes at 2100hrs GMT. The New York session also features high activity, especially during the early hours when it overlaps with the open London session. Most movements are driven by the US dollar, which is the most traded currency as well as the most influential in the Forex markets. Additionally, most news and events that impact the US dollar are typically released in the early hours of the New York open. There is high liquidity and volatility in the early hours during the London/New York overlap (1300hrs GMT – 1600hrs GMT), and most assets feature thin spreads. However, volatility and liquidity tend to decrease during the latter half of the New York session. The USD is the cue provider during the New York session, and traders can trade all the major pairs such as EURUSD, GBPUSD, USDCHF, USDJPY, USDCAD, AUDUSD, and NZDUSD. The US Federal Reserve is the central bank to watch, as well as major US data such as Nonfarm Payrolls, Trade Balance, GDP, Industrial Production, and Retail Sales.
When is the Best Time to Trade?
The best time to trade will depend on you – the trader. Your availability, your time zone, or your trading style. For instance, if you want to target just a few pips in a low volatile environment, the Asian trading session will suit your well. But if you want high volatility and big price movements, it is best to trade during the London session or the early hours of the New York session.
Your time zone and availability will also determine the best assets for you to trade. For instance, if you are available to trade from 0800hrs GMT to 1200hrs GMT (during the London session), you are better off trading EUR and GBP pairs.
If there is no restriction though, the general consensus is that the best time to trade is when the different trading sessions overlap. These times are when market participants from different financial centres of the world are active. There is sufficient volatility and different assets can be traded with high liquidity and low spreads. The best overlap is the London/New York active hours (1300hrs GMT – 1600hrs GMT).
Why Trade Forex with AvaTrade
- Reputable Global Broker – Regulated in multiple jurisdictions
- Attractive Trading Conditions – Low spreads, transparent prices, unrestricted short selling, and fast trade execution at all times
- Comprehensive Trading Resources – Access AvaProtect, AvaSocial, and Trading Central
- Customer Support – Friendly, professional, and responsive human support
There are countries such as the US, UK, and Australia that observe Daylight Savings Time (DST). This will also influence the open and closing times of the respective trading sessions. While AvaTrade notifies traders of changes in different open/closing times, it is important to note that due to DST, there will be changes in market hours in March, April, October, and November.