What’s The Best Time To Trade Forex? It all depends on YOU, just like everything else in life.
Do you prefer to move slowly and take your time with each trade? Perhaps you are better suited to trading on longer time frames.
Or do you prefer the thrill of quick, fast-paced action?
What Time Frame Should I Trade?
One of the reasons new traders don’t perform as well as they should is that they usually trade at the wrong time frame for their personality.
Because new forex traders want to get rich quickly, they will begin trading small time frames, such as 1-minute or 5-minute charts.
When they trade, they become frustrated because the time frame does not suit their personality. As a forex trader, you should understand which time frame to trade on.
For some forex traders, the 1-hour charts are the most comfortable to trade. This time frame is longer, but not excessively so, and trade signals are fewer, but not excessively so.
Trading on this time frame allows you to take your time analyzing the market and not feel rushed. Some traders can never, ever trade in a single hour because it’s too slow for them.
Most prefer to trade on the 10-minute chart since it gives them enough time (but not too much) to make trading-related decisions.
Other traders decided to only trade daily, weekly, and monthly charts because they think hourly trades are too fast. So, you’re probably wondering what the best time frame is for you.
Choosing The Best Timeframe
If you’ve been paying attention, you’ll notice that it all depends on your personality. You must be at ease with the time frame in which you are trading.
When you’re in a trade, you’ll always feel some kind of pressure or frustration because real money is involved. That’s understandable.
However, you should not believe that the reason for the stress is that things are moving too quickly for you to make decisions or too slowly for you to become frustrated.
Most traders couldn’t stick to a time frame when they first started trading. So they began with a 15-minute chart before experimenting with the 5-minute, 1-hour, daily, and 4-hour charts.
This is normal for all new forex traders until they find their comfort zone, which is why we recommend that you DEMO trade using different time frames to see which best suits your personality.
What Time Frame is Best For Trading Forex?
Below are some basic time frames and the differences between them;
Long-term traders typically use daily and weekly charts. The weekly charts will provide a longer-term perspective and will aid in placing daily entries. Trades typically last a few weeks to several months, if not years.
- There is no need to monitor the markets throughout the day. When there are fewer transactions, there are fewer opportunities to pay the spread and more time to consider each trade.
- Typically, only one or two large swings are produced per year, so PATIENCE is required. A larger account is required to ride longer-term swings.
- Losing months regularly.
Hourly time frames are used by short-term traders, who hold trades for several hours to a week.
- More trade opportunities. Months are less likely to be lost.
- Less reliance on one or two trades per year to generate profits.
- Transaction costs will rise (more spreads to pay). Therefore, the overnight risk becomes a consideration.
INTRADAY Traders use minute charts such as the 1-minute and 15-minute. Trades are entered during the day and exited at the end of the day.
- There are numerous trading opportunities.
- There is a lower risk of losing months overnight.
- Transaction costs will be significantly higher (more spreads to pay).
- Mentally more difficult because biases must be changed frequently.
- Profits are constrained by the need to exit at the end of the day.
What To Consider:
You must also consider how much capital you have to trade with. Shorter time frames allow you to better utilize margin and set tighter stop losses.
Larger time frames necessitate larger stops, and thus a larger account, to handle market swings without facing a margin call. It’s important to note that whatever time frame you choose to trade should be compatible with your personality.
This is why we recommend experimenting with different time frames to find your sweet spot. It will assist you in determining the best fit for you to make the best trading decisions possible.
When you’ve decided on your preferred time frame, the real fun begins! This is when you begin to consider multiple time frames to assist you in analyzing the market.
When Is the Best Time of Day to Trade Forex?
In Forex, we know that liquidity is highest when more people participate in the markets. So, when is it best to trade forex?
Ideally, the best time to trade forex is during the overlap between the two sessions. To understand why let’s look at some characteristics of the two overlap sessions.
Tokyo – London Overlap
For a variety of reasons, liquidity is extremely low during this session. Typically, there isn’t as much activity during the Asian session, so once the afternoon arrives, it’s a snooze fest.
Trading can be tedious as liquidity dries up with European traders just getting into their offices. This would be an excellent time to take a break, play a round of putt-putt golf, or look for potential trades for the London and New York sessions.
London – New York Overlap
According to the most recent data from FXLIQUIDITY, an FX market analytics service, liquidity is at its peak between 10 AM and 3 PM London time (10 am NY time).
This is where the real fun begins! Traders can be heard cracking their knuckles during this time because they know they have a lot of work ahead of them.
This is the busiest time of day, with traders from the world’s two largest financial centers (London and New York) starting to compete.
This is the time when we can expect to see some big moves, especially when news from the United States and Canada is released. Markets can also be impacted by “late” news from Europe.
If any trends emerged during the European session, we may see them continue as U.S. traders decide to jump in and establish positions after reading up on what happened earlier in the day.
Finally, it is critical to understand that the WM/Refinitiv Spot Benchmark Rate is determined during this time. The rate is set at 4 PM London time and is referred to as the “London fix.”
A currency “fixing” is a daily time when the prices of currencies for commercial transactions are set or fixed. Because currency prices fluctuate by the second, a daily “reference point” is required.
This daily rate is used by banks and other financial institutions to set their currency exchange rates, which in turn determine the prices used in corporate foreign exchange transactions.
From a trading perspective, this daily fix may result in a flurry of trades in the market 15 to 30 minutes before the fixing time, which abruptly disappears during the fixing time.
Finally, some European traders may be closing their positions as their day comes to an end, which could result in some choppy moves right before lunchtime in the United States.
The Best Days to Trade Forex
So we know that the London session is the busiest of all the sessions, but there are certain days of the week when all markets tend to move more.
Learn when the best days of the week are to trade forex. Studies show that it’s best to trade during the middle of the week because this is when the most action occurs.
Fridays are typically busy until 12:00 PM EST, when the market virtually shuts down until it closes at 5:00 p.m. EST. This means that on Fridays, we only work half-days.
Weekends always begin early. So, based on all of this, we’ve discovered the busiest and best days of the week to trade forex. Because high volatility tends to present more opportunities, the busiest times are usually the best times to trade.
Use Your Time to Trade Wisely
There is no way to trade all sessions unless you are Edward Cullen, who does not sleep. Why would you, even if you could? While the forex market is open 24 hours a day, this does not mean that there is always activity!
Furthermore, sleep is an essential component of a healthy lifestyle! You need sleep to recharge and have the energy to do even the most mundane tasks. If you want to become a hotshot currency trader, you’ll need to get some rest.
Every trader should understand when it is appropriate to trade and when it is not. Understanding when it is best to trade and when it is best to sit out and play Fortnite instead.
I hope this guide has given you insights on the best time to trade forex, the best time of day to trade forex, and the best days to trade forex. Here’s a quick reference guide to the best times to trade Forex:
- When two sessions overlap! These are also the times when major news events are likely to cause volatility and directional movements.
- Make a note of the opening and closing times by bookmarking the Market Hours cheat sheet.
- You can also use our Forex Market Time Zone Converter to see which trading sessions are open in your current time zone.
- The European session is usually the busiest of the three.
- The middle of the week typically sees the most movement, as the pip range for most major currency pairs widens.