One of the biggest draws of forex trading is the fact that the market is open 24 hours a day, five days a week. This means the opportunity to earn from trades exists at any hour of the day. If you’re diligent, and have a workaholic personality you can trade anytime you want and take advantage of market movements you are plotting.
Why is the forex market open all day? It has to do with time zones. The simplest explanation is that as trading in a certain country ends, the trading in another country has just begun or is about to begin. For example, trading officially begins with the Australian market. But as this market is about to close, the market in New York is about to open. In between that time, the Japanese market opens as well. Now imagine as the official trading for each country in different time zones begins and ends and you’ll get the general picture. This cycle overlaps all throughout the day and all through the week. The only time the forex market is closed is during the weekend.
But even though the forex market is open all day and night, there are still certain hours of the day when trading is at its best. Generally, that time of the day when the currency markets of two or more countries overlap is the best time to do your trading. The reason for this is that there is greater liquidity especially with certain currency pairs. There is also a wider movements within the range in terms of pips, which translates to more active periods of profit-taking if you’re in the right position. In other words, the greater liquidity and the increase in the number of trades are factors that contribute to better trading opportunities for the forex trader. If these conditions are exploited properly with the right interpretation of data and heeding the correct analysis then profitability is there for the taking.
The following are the best time overlaps that you can take advantage when forex trading:
Europe – North America
This overlap happens between 8 AM to 11 AM. It’s the time when the New York and London markets are both trading. If you’re into European currencies this is the best time to trade because this is when trading on these types of currencies is at its heaviest. It also offers the most liquidty for currency pairs that involve European currencies like the GBP, Euro and Swiss Franc.
Asia – Europe
The overlap happens between 12 AM to 3 AM EST. While the Sydney market closes at 1 AM EST, the Tokyo, Hong Kong and Singapore markets are still open and this will overlap with the opening of the Frankfurt and London markets, which is between 2 to 3 AM EST. If you are trading the Yen and other crosses that involve the Yen and European currencies then this is the magic time for you.
The 1 PM to 3 AM time period also sees the Asian and European markets overlapping. This can be another option.
Australia – Asia
The overlap occurs between 9PM to 12 midnight EST and this sees the New Zealand and Australian forex market overlapping with the Asian market. You get the most benefit trading during this time if you dabble in Australian and New Zealand dollars as well as the Yen.
About The Author
Mario Singh owns and operates Askmariosingh.com, a website for forex traders. The site offers currency news and other information that is essential for forex trading.