Due to the large number of transactions that take place, the London trading session is normally the most volatile session. The majority of trends begin during the London Session.  

Just when Asian market participants are starting to close shop, their European counterparts are just beginning their day. While there are several financial centres all around Europe, it is London that market participants keep their eyes on.

Historically, London has always been a centre of trade thanks to its strategic location.

Today, London benefits from its time zone. London’s morning overlaps with late trading in Asia, and London’s afternoon overlaps with New York City.

It’s no wonder that it is considered the forex capital of the world, with thousands of people making transactions every single minute.

About 43% of all forex transactions happen in London.

Some traders also refer to the London session as the “European” trading session.

That’s because, aside from London, there are major financial centres open in Europe as well, such as Geneva, Frankfurt, Zurich, Luxembourg, Paris, Hamburg, Edinburgh, and Amsterdam.

The Best Times to Trade the Forex Markets

Many first-time forex traders hit the market running. They watch various economic calendars and trade voraciously on every release of data, viewing the 24-hours-a-day, five-days-a-week foreign exchange market as a convenient way to trade all day long.

Not only can this strategy deplete a trader’s reserves quickly, but it can burn out even the most persistent trader. Unlike Wall Street, which runs on regular business hours, the forex market runs on the normal business hours of four different parts of the world and their respective time zones, which means trading lasts all day and night.

So what’s the alternative to staying up all night long? If traders can gain an understanding of the market hours and set appropriate goals, they will have a much stronger chance of realising profits within a workable schedule.

KEY TAKEAWAYS

• The forex market runs on the normal business hours of four different parts of the world and their respective time zones.
• The U.S./London market overlap (8 a.m. to noon EST) has the heaviest volume of trading and is best for trading opportunities.
• The Sydney/Tokyo market overlap (2 a.m. to 4 a.m.) is not as volatile as the U.S./London overlap, but it still offers opportunities.

The Forex Markets Hours of Operation

First, here’s a quick rundown of the four markets (all times are in Eastern Standard Time, or EST):

New York Session

The New York Stock Exchange (NYSE) (open 8 a.m. to 5 p.m.) is the world’s second-largest forex platform and is closely watched by foreign investors because the U.S. dollar is involved in 90% of all trades, according to Kathy Lien’s “Day Trading the Currency Markets” (2006).1 Movements on the NYSE can have an immediate and powerful effect on the dollar. When companies merge and acquisitions are completed, the dollar can instantly gain or lose value.

Tokyo Session
Tokyo, Japan (open 7 p.m. to 4 a.m.) was the first Asian trading centre to open and now accounts for the majority of Asian trade, trailing only Hong Kong and Singapore. USD/JPY (or US dollar vs. Japanese yen), GBP/USD (British pound vs. US dollar), and GBP/JPY are currency pairs that see a lot of action (British pound vs. Japanese yen). Because of the Bank of Japan’s (Japan’s central bank’s) heavy influence over the market, the USD/JPY is an especially good pair to watch when the Tokyo market is the only one open.

Sydney Session
The trading day officially begins in Sydney, Australia (open from 5 p.m. to 2 a.m.).

While it is the smallest of the mega-markets, it sees a lot of early action when the markets reopen on Sunday afternoon because individual traders and financial institutions are trying to regroup after the long pause that began on Friday afternoon.

London Session
London, United Kingdom (open from 3 a.m. to noon): The United Kingdom (U.K.) dominates global currency markets, with London as its focal point.

According to a BIS report, London, the world’s central trading capital, accounts for roughly 43% of global trade.

The city also has a significant impact on currency fluctuations because the Bank of England, which sets interest rates and controls the GBP’s monetary policy, has its headquarters in London.

Forex trends frequently originate in London, which is important for technical traders to remember. Technical trading entails analysing statistical trends, momentum, and price movement to identify opportunities.

The Best Hours for Forex Trading

Currency trading is unique because of its hours of operation. The week begins at 5 p.m. EST on Sunday and will run until 5 p.m. on Friday. Not all hours of the day are equally good for trading.

The best time to trade is when the market is most active. When more than one of the four markets is open simultaneously, there will be a heightened trading atmosphere, which means there will be more significant fluctuations in currency pairs.

When only one market is open, currency pairs tend to get locked in a tight pip spread of roughly 30 pips of movement. Two markets opening at once can easily see movement north of 70 pips, particularly when big news is released.

Overlaps in Forex Trading Times

The best time to trade is during overlaps in trading times between open markets. 2    Overlaps equal higher price ranges, resulting in greater opportunities. Here is a closer look at the three overlaps that happen each day:

U.S./London (8 a.m. to noon): The most market overlap occurs in the US/London markets.More than 70% of all trades happen when these markets overlap because the U.S. dollar and the euro (EUR) are the two most popular currencies to trade, according to Lien. This is the most optimal time to trade since volatility (or price activity) is high. 5

This time period is not as volatile as the U.S./London overlap, but it still offers a chance to trade in a period of higher pip fluctuation. EUR/JPY is the ideal currency pair to aim for, as these are the two main currencies influenced.

This overlap sees the least amount of action of the three because of the time (most U.S.-based traders won’t be awake at this time), and the one-hour overlap gives little opportunity to watch large pip changes occur.

Why Is Forex Liquidity Important?

Liquidity refers to how easy it is to quickly buy or sell securities for a fair price. If there is high liquidity, the bid/ask spread will be tighter and you can trade more without moving the market.

On the other hand, in an illiquid market, the spread between the bid and ask may be very wide and not very deep. In general, liquid currency pairs are those that are active and have high trading volume.

Which Are the Most Liquid Currencies?

• The most traded currencies in the world include the U.S. Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Australian Dollar (AUD), Canadian Dollar (CAD), and Swiss Franc (CHF) are the most commonly used currencies.The four major pairs at present are EUR/USD, USD/JPY, GBP/USD, and USD/CHF.  

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