Forex is a foreign exchange market that runs 24/7, making it unique and full of opportunities for traders worldwide. This can make you anxious and prompt you to make sudden decisions. These are the sorts of decisions that you might regret later if you are not entirely familiar with how forex works. Forex has four types of business hours, since it operates worldwide, paying attention to time zones. This makes forex trading easier using daily charts. We will see here how you can benefit from them if you set your own goal, without fear of missing out.
Basic Forex Trading Hours Rules
- Forex markets run like Wall Street on regular business hours, BUT including four different time zones/parts of the world and their best trading hours.
- The U.S./London market overlaps, so they have the best opportunities for trading.
- The Sydney/Tokyo markets overlap, as well. They are not as fruitful as the US./London trading hours, but there are still many opportunities to gain from.
London (3 a.m. to NOON)
London, Great Britain The United Kingdom (U.K.) is number one of the currency markets across the globe, and without London, something wouldn’t be right. It is the epicenter of around 43% of global trading and continues to grow. It also influences currency fluctuations greatly, mostly because of the Bank of England, which holds and regulates GBP (monetary policy), and they are also in charge of setting interest rates. It’s a must-know for traders than almost every Forex trend originating from London so that they can analyze potential opportunities using different tools.
New York (8 a.m. to 5 p.m.)
As you can see, New York and London trading time are overlapping. The NY market has benefited by far the most from foreign investors because of the U.S. dollar. Companies are making their moves, they buy and sell, and it gives a value of the dollar quickly, which makes a quick, powerful effect on the stock market, or NYSE (the New York Stock Exchange).
Tokyo (from 7 p.m. to 4 a.m.)
Tokyo is an Asian trading center where you can usually trade currency pairs like USD/JPY (or U.S. dollar vs. Japanese Yen). USD/JPY is a good option when the Tokyo market is the only one that is open because the Bank of Japan has a massive influence over the market.
Sydney (from 5 p.m. to 2 a.m.)
Sydney is the smallest part of the global stock market, but this is where it all begins. After a pause that happens on Friday afternoon, traders will usually see a lot of action made when the market is reopened on Sunday. This occurs because many companies are trying to regroup before the reopening.
The Best Forex Trading Hours
Currency trading week begins at 5 p.m. EST on Sunday and runs until 5 p.m. on Friday.
Remember, the best time to trade is when the market is most active, not whenever it’s open. If only two markets overlap, there is a much higher chance for fluctuations in currencies, and an opportunity to gain advantage and invest or buy.
When two markets open up at the same time, we can easily see action north of 70 pips, usually when something big happens in the economy or the world.
Why are overlaps important
The best time for traders is during overlaps between main open markets. Like we said above, overlaps give a higher price range, which means better and more significant opportunities. Here it is how it works:
U.S./London (from 8 a.m. to noon): This is the most massive forex overlap between the U.S. and London and has the best chart time for day trading. They hold the two most popular currencies to trade with, which are Euro and Dollar. The volatility is high (the price activity), which means this is the most optimal time to trade. On a weekly and daily basis, it lasts four hours, giving you enough chance to grasps what is going on.
Sydney/Tokyo (from 2 a.m. to 4 a.m.): As we said, this has the smallest impact on the market, but since everything begins with it, it gives a chance to trade when higher pip fluctuation appears. On the Sydney stock market, EUR/JPY is the best currency pair to pay attention to because here, these two are the most valuable currencies.
London/Tokyo (from 3 a.m. to 4 a.m.): Here, we have the least amount of action, mostly because of the time frame chart (many traders aren’t awake at this hour), but the one-hour overlap gives little opportunity to observe how significant pip changes occur.
Knowing about overlapping can help you take advantage of the market, and enhance your chances according to your goals. It is also essential to keep an eye on world events, whether it’s a company that sells or buys something or critical social issues. That’s how you can be on track and make a daily chart forex strategy. This will allow you to learn how to invest appropriately and how basically everything influences the stock market. The overlapping gives us the balance we need, so you can be sure that you will not miss your opportunity, nor mess up your sleeping schedule.