The Golden Hours of Forex Trading-Everything You Need to Know

Investors should be aware of the best time to trade in order to trade successfully. Even though the market operates twenty four hours on a daily basis, traders must be aware of the best times for engaging in trading for best results. Alternatively, they must also be aware of the specific timings when it is better to avoid trading. Read on to find out the ideal times for engaging in day trading and also determine the day of the week that is highly productive in terms of trading.

The Golden Hours for Forex Trading

The forex market is global in nature, which is precisely why traders place their orders or trades in different time zones. This is one of the major reasons why the market operates on a 24 hours basis. However, despite being active throughout the day, the forex market isn’t profitable for the entire 24 hours period. The fx market has its own specific timings and traders must stick to these trading hours if they truly intend to earn attractive gains. Typically, trading activities as well as liquidity is at its highest when two different sessions overlap with each other. It is during these moments that traders, around the world engage in trading, thereby resulting in an increase in trends and market movements.

When it comes to indulging in forex trading, traders must remember the following:

Busiest Trading Session: The European or London session is considered to be the busiest trading session. In fact, around thirty percent of all the transactions/trades happen during this particular session.

Best hours: The best hours for trading are when the major trading sessions overlap with each other. For instance, traders must place their trade orders when the London and New York sessions overlap with each other.

Factors Affecting Potential Profits as well as the Liquidity

Before proceeding further, take a look at the four important factors that affect potential forex profits as well as the liquidity during different market times/hours.

1. Traders can make money irrespective of the fact whether the rates of exchange are rising or falling. In fact a higher volatility results in higher potential profits as well as losses.
2. The rates of any currency is directly influenced by its supply and demand, hence, the biggest fluctuations in rates happen when the trade volumes are extremely high.
3. At the time when the market is witnessing low trading activities, the spreads or commissions may increase, even while the liquidity falls on an overall basis.
4. The fx market mainly comprises of four major sessions including the London or Europe session, New York or United States session, Japan or Asia session and Sydney or New Zealand & Australian session. These sessions last for nine hours and witness the maximum number of trading activities.

The Major Sessions for Trading

In their bid to avoid getting confused by these different trading hours or time zone, traders around the globe use a common time frame (Greenwich Mean Time) for reference purpose. The GMT runs 4-5 hours ahead of the United States Eastern timing, since there isn’t any daylight shift utilized in the GMT.

Best Times for Day Trading-The New York and London Session

Since New York and London are two of the busiest trading sessions, traders can expect to see liquidity at its highest as and when both the sessions start overlapping with each other. It is during these times that investors can buy different currencies, depending upon their investment strategy. A good number of professional and experienced traders regard 14:00 GMT as the ideal time for trading. During this particular time period, London gears up for a close, whereas the New York market begins to gradually open up. This results in huge swings in the prices of the currency, thereby providing traders with huge potential for earning profits. However, this also the period when the traders should remain careful as when the London session comes to an end, the market movements become choppy as well as unpredictable.

Similarly, when the London session opens up, it is usually extremely active as well as profitable since this session overlaps with the Tokyo session, wherein the latter is gradually coming to an end.

Ideal Days for Forex Trading

Now that you are aware of the best hours for day trading, you must also have sufficient knowledge around the ideal days for engaging in forex trading. Remember, all the days in a week are profitable as far as forex trading is concerned and thus, as a trader you must know exactly when to engage or refrain from trading.

Mondays are usually slower, since the news and updates gradually find their way into the markets. However, that does not imply that you should refrain from trading during Mondays. The ideal days for trading are Wednesday and Thursday. On the other hand, on Friday, the market is mostly active during the first half only. The bottom line is that you must trade in accordance with your trading strategy and rhythm.