The forex market is open 24-hours a day, but not all those hours are active and worth trading. Most day traders seek out activity and movement; if a forex pair isn’t moving, profit potential is reduced, and the spread—the difference between bid price and ask price—can slowly erode the trader’s account if they trade during these quiet times. By trading only during the most active times, day traders can capitalize on the activity and avoid the doldrums.
Global Trading Sessions
The forex market doesn’t have a centralized location; rather, it’s a network of banks, brokers and traders which facilitate trade around the clock during the week. Due to the various time zones around the planet there’s always a market open somewhere. For example, London is open for business from 3 AM EST until noon. New York and Toronto are open from 8 AM EST to 5 PM. At 5 PM Sydney opens, followed by Tokyo and then London again.
A market is always open somewhere, but that market may not necessarily actively trade all forex pairs. For example, after the U.S. market closes, Sydney and Tokyo open. Pairs that include the Australian dollar or Japanese Yen will see some activity from these markets, but the EUR/USD is generally very quiet because this currency pair is not directly related to either of these economies, whereas the AUD/USD or USD/JPY are.
If you live in a different time zone, check for the global trading session times here: http://www.forexmarkethours.com/markethours.php. Also, you can use this tool to see how daylight savings time affects various market open and close times.
Based on these sessions, forex pairs will experience activity at different times of the day, although most pairs see an uptick during the London and New York sessions as these are major centers transacting around the globe. Many other countries throughout Europe, and then North, Central and South America are also open during these times.
Below are several major pairs popular among day traders, and the ideal times to trade each of them based on price movement.
Charts courtesy of: VantagePointTrading.com/Daily-Forex-Stats. The following charts show volatility (price movement in pips) for each hour of the trading day, based on a 10-week average as of September 15, 2014. Over time, volatility will increase or decrease, pushing the pip movement for each hour up or down. The hours that are most volatile typically don’t change, so even if conditions change, the ideal trading hours discussed below are usually static over time.
Times on the chart are for the GMT time zone, but are converted to EST in the information below each chart – be sure to adjust for daylight savings time at the appropriate time of year.
Based on the chart, the most activity occurs between the hours of 6 and 16 GMT, or 2 AM to 12 PM EST. If seeking maximum efficiency, only trade between 12 and 15 GMT (8 AM to 11 AM EST); this three hour window has the largest moves of the day.
The USD/CHF is nearly exactly the same, so day trading in the USD/CHF should be done during the same hours as the EUR/USD.
Volatility is fairly consistent throughout the day in this pair, since the Japan and New York sessions are spread out across much of the 24-hour period. A three hour spike is seen between 12 and 15 GMT (8 AM and 11AM EST). Day traders should focus on day trading during this window.
From 6 to 15 GMT (2 AM to 11 AM EST) this pair is quite active and tradable. 8 to 10 and 12 to 15 GMT are the most active, which is 4 AM to 6AM and 8 AM to 11 AM EST.
This pair is fairly inactive through much of the day, but sees spikes between 1 and 2 GMT (9 PM to 10 PM EST) and 12 to 15 GMT (8 AM to 11 AM EST).
The NZD/USD trades in a similar fashion, so day trading in the NZD/USD should be done during the same hours as the AUD/USD.
This pair sees a large uptick in price movement between 12 and 16 GMT (8 AM and 12 PM EST). Outside of these hours day, trading isn’t recommended.
The Bottom Line
The best times to day trade will vary by pair, but since all these major pairs include the USD they are highly tradable between 8 AM and 11 AM EST. If day trading, this makes it simple. Trade any of these pairs during that three hour window. You’ll get the most price movement during those hours, which helps offset the cost of the spread or commissions.
In each pair there may also be other times of day which also produce good movement. These times may be more convenient if you’re in another time zone and need to trade at a different time of day.