The best time to trade forex is when the market is at its most active levels. That is when the trading spreads, the bid price and ask price differences, have the tendency to narrow.
During that situation, there is a lesser amount of money going into the market makers. Thus, there is more money than you can gain as your profit.
The Top 4 Forex Exchanges
The top 4 forex exchanges are in Tokyo, New York, Sidney, and London. Fore traders have to stay in a similar forex hour when their two exchange overlap.
If there is more than one exchange open, then, the forex trading volume will not increase. But, at the same time, the volatility increases the rate when the currency price or equity changes. That situation benefits forex traders.
Unlike another type of investment, where investors have to avoid volatility, in forex trading, bigger volatility can bring greater profit for the traders.
The Forex Market Hours
Forex has 15 independent exchanges worldwide. These exchanges open from Monday to Friday. Each exchange owns unique trading hours, but there are four most important time windows (shown in Eastern Standard Time), which are:
- Tokyo: 7 p.m. to 4 a.m.
- New York: 8 a.m. to 5 p.m.
- Sydney: 5 p.m. to 2 a.m. (midnight0
- London: 3 a.m. to 12 p.m. (noon)
These exchanges function independently, but they trade the same currencies. Thus, with two exchanges open, the volume of a given currency will significantly increase.
The bid and ask price of a forex market exchange give a direct effect to the bid and ask price on the other open forex exchanges. That situation reduces the market spreads and increases volatility.
Traders most favorite trading time is around 8 a.m. to noon since that overlaps the London and New York exchanges. During these times there are around 50% of the total forex trades happening.
Contrarily, from 5 p.m. to 6 p.m. there is high forex volume in the Singapore and Sydney exchanges, meanwhile the least volume in the London and New York exchanges.
