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Home arrow Articles arrow Articles-Business-Management arrow When is the Best Time to Trade Forex?
When is the Best Time to Trade Forex?
Written by Lance Beggs   


 
 
When is the Best Time to Trade Forex?

 

I often get asked, ‘when is the best time to trade forex intraday?’

 

Great question!

 

Just because the market trades 24 hours a day doesn’t mean that there are opportunities available all day every day. The market typically varies in range, and therefore opportunity, at various times throughout the 24 hour period. Some periods of time have a larger average range of price movement. Other periods of time have a more narrow range of price action. The best time to trade forex for you will depend on whether your strategy performs best in a wider range market, which has greater likelihood of extended trends, or whether it prefers a narrower range-bound market.

 

Let’s look at the various forex sessions.

 

 

Asian Session

European Session

US Session

0000-0900 GMT

0700-1700 GMT

1300-2200 GMT

1900-0400 EST

0200-1200 EST

0800-1700 EST

 

 

NB. The European Session times are based around the open in Frankfurt. Some people prefer to define the European session based on UK hours, rather than Europe, from 0800 – 1700 GMT. Test to see which works best for your strategy.

 

You’ll notice that there’s some overlap of sessions as well:

 

 

US Euro Overlap

Euro Asian Overlap

1300-1700 GMT

0700-0900 GMT

0800-1200 EST

0200-0400 EST

 

 

Typical ranges for these sessions (including overlaps) depends on the sample of data chosen, and so will vary from study to study. However typically they show a similar occurrence – the peak activity times are (1) the European Session or (2) the Euro/US Overlap. If you want to trade a market with potential for movement, these are the best times to trade. Outside of this, you need to be prepared for a more range-bound market.

 

As an example, the following figures show average ranges for GBP/USD, from a 2002-2004 study presented by Kathy Lien in her excellent book,Day Trading the Currency Market.

 

 

Asian Session

European Session

US Session

US Euro Overlap

Euro Asian Overlap

65 pips

112 pips

94 pips

78 pips

43 pips

 

 

The European Session in this sample of data clearly provides the greatest average daily range. And you may notice that while the US Session here provides a greater range than the US Euro Overlap, the bulk of the US session range occurs within that four hour period at the beginning, making it a great period to trade.

 

Let’s check a chart of recent price action and see how it compares with the above sample figures. Please note the chart times are set at the German time zone (GMT-1).

 

 

 

 

Not bad. The European Session and the US Euro Overlap clearly provided the best opportunity.

 

However, in looking at one chart we need to remember it is just ONE session, and not necessarily representative of the averages. In this chart example, the US Euro Overlap was significantly larger in range than other sessions, which is not the case on average. And I’m sure I can find a significant number of examples as well that show the Asian session trending and the Euro and US sessions flat.

 

I highly recommend that rather than just trusting all the above information, you should spend an hour or two looking through past data on your forex platform. Mark off the session boundaries and see how the ranges vary from day to day.

 

Before we wrap it up, there’s also another way for you to determine the best timeframe for your own trading - that is, the best time to trade forex should depend on your lifestyle. If all you have available for trading is the Asian session, then maybe you need to adapt your trading to a style suited to the more narrow-range market.

 

Coming from someone who has forced UK trading hours into an Eastern Australian lifestyle, causing years of interruption to my evening family life, I can highly recommend avoiding this pain – learn to trade the session that fits your lifestyle, don’t try to fit life around your trading.

 

One final option if this doesn’t work for you is to another market, or perhaps extending your timeframe to the daily charts.

 

All the best,

 

Lance Beggs.

 

 © Copyright 2009. Lance Beggs. www.YourTradingCoach.com. All Rights Reserved.

 

 

 



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