For those that have traded for a long time, you most likely would have worked out when the best time for you to trade is, but for those just starting out, you kind of wonder when you should be trading, should it be the morning the evening or the middle of the night?
The good news is that unlike the stock markets which open at 8 am and close at 4:30 pm, the forex markets are open 24 hours a day and only close to retail traders over the weekend. There is no set time that you need to trade between so there are opportunities at all times during the day to trade. This does not however mean that there isn’t an optimum time to trade, the thing that decides when the optimum trade time depends on a number of different factors and will be different for every single trader. So we have put together some ideas on what would be the right time to trade, and also ways that you can work out for yourself what time would be the best time for you to trade when trading from the UK.
So we mentioned that the markets are open 24 hours a day, this is true, but also not true at the same time. You see the 24 hour period is actually made up of four different trading sessions that take place around the world. These different trading sessions open and close at specific times and overlap each other ensuring that the services of the markets remain open for that 24 hour period, so what are those times?
- London, United Kingdom: 8 am to 5 pm UTC
- New York, United States: 1 pm to 10 pm UTC
- Sydney, Australia: 10 pm to 7 am UTC
- Tokyo, Japan: 12 am to 9 am UTC
So as you can see, those trading sessions overlap, but why is it relevant to know when the different trading sessions are The simple fact is that this will determine a number of different things for different currency pairs, certain pairs will be more active during certain trading sessions than they are in others, there are also times of added liquidity and potential volatility during opening and closing, as well as overlapping times, we will look into those things in a little more detail latrine this article.
It is important to know exactly when the markets overlap, so we have detailed them below for ease of understanding:
- London-New York (the European-American session): 12 pm to 4 pm UTC
- Tokyo-London (the Asian-European session): 7 am to 8 am UTC
- Tokyo-Sydney (the Asian-Pacific session): 11 pm to 6 am UTC
Within the time periods mentioned above, there are of course other markets, these are not the only markets that are available, they are simply the largest and most active markets, there are more than 20 other decentralised markets running at the same time, they are simply not considered as one of the major markets. It is predicted that about 40% of all trading comes from the UK alone, with the USA being the second-largest location for trading. Due to this, you can imagine that the busiest time for trading is when the UK and US markets overlap. It should also be mentioned that these times do change slightly as the year progresses due to things like Daylight Saving Time within the UK.
We know what you are thinking, can you trade over the weekends? As a rule, the forex markets are closed over the weekends, it opens on Sunday at either 9 pm or 10 pm and closes on Friday at 10 pm GMT, there are however specialist brokers that allow you to trade over the weekends, but these are few and far between and often have quite hefty joining requirements. There are however opportunities to trade on the weekends, many brokers are now beginning to allow cryptocurrency trading which has a 24 hour trading time, 7 days a week, so you are able to trade over the weekends independent from the forex market opening times.
When you started trading, hopefully you would have selected the currency pairs that you wish to trade, well it probably won’t surprise you to hear that different currency pairs are best traded within different market sessions, for example, there is a lot more volatility and movement on the JPY pairs during the Asian markets than there are during the European sessions, it all comes down to where in the world those currencies are based and which market sessions are open. A lot of the more popular currency pairs are ones where the sessions overlap, for example, the EUR/USD pair is popular as those two sessions overlap each other in regards to the London and New York markets.
Here are some of the more popular currencies pairings for different market sessions:
- European session: EUR/USD; GBP/USD; EUR/JPY; GBP/JPY; GBP/AUD; GBP/CHF; EUR/CHF; EUR/GBP
- American session: EUR/USD; GBP/USD; USD/CAD; USD/CHF; GBP/CAD; EUR/CAD; BTC/USD
- Asian session: USD/JPY; GBP/JPY; USD/CNY; EUR/CNY; GBP/CNY
- Pacific session: AUD/USD; AUD/JPY; AUD/NZD; GBP/AUD; EUR/AUD
We also briefly mentioned that your trading style and strategy will also have an impact on when the best time for you to trade as a UK trader will be, the strategy you chose will in the end dictate where you need to spend your time and which of the sessions you need to trade in. There are four main trading styles which we will briefly cover now:
-Day Trading is a style of trading that involves making a number of shorter-term trades throughout the day, this helps to reduce the risk of charges overnight, it can however be quite intensive and requires you to monitor the markets at all times when there are trades open.
-Scalping is what a lot of traders are now getting into, these are very short term small trades that are executed in high volume. A lot of trades are made, and it offers a good balance between risk and reward, the profits are small but with so many trades being made, they slowly add up.
-Position trading is a long term style of trading, it is a good style for those investors who want to play the long game, it involves looking for trends and attempting to make profits on major price movements.
-Swing trading is another long term trade and it is one where you hold on to trades for days at a time as the markets trend and move up and down.
When choosing your style, it will also change when you may need to be trading, for instance, a scalper on the EURUSD pair may not want to trade during the Asian markets simply because there is not much liquidity or volatility on this pair at that time, but instead to scalp during the crossover of the London and New York sessions where there is a history of a lot of liquidity and volatility, perfect for the scalper. For long-term traders, it doesn’t make too much difference, but it is still easier to get in and out of a trade during times of higher liquidity.
UK trading during the London session:
Living in the UK obviously makes it far easier to trade during this session, however, you are not limited to it at all, if your strategy does not require you to sit at the computer then you can trade during any of the available sessions. The European markets open at a very similar time to the London sessions so pairs like the EUR/GBP are very popular pairs with a lot of liquidity during this session. Of course, there is also a crossover between the London session and the New York session so pairs like EUR/USD or GBP/USD are very popular during these crossover times.
UK trading during the New York session:
The New York session starts at the end of the London sessions and runs until the #Sydney session opens, if you have decided to trade a pair that includes the USD then this session will most likely be the best session for you to trade in. Fortunately, this is not too late for those in the UK but may involve some evening trading after work or before bed.
UK trading during the Tokyo session:
The Tokyo and London sessions crossover by one hour in the mornings, however for those trading in the Uk, the Tokyo session is not all that accessible due to it taking place when most people in the UK will be sleeping. Pairs like the USD/JPY, EUR/JPY, and AUD/JPY are some of the more popular currencies to trade. This session is seen as a safer session to trade as there is less volatility and movement within the markets.
So those are some of the things to think about when deciding to trade within the UK, there is a lot to think about we know, but deciding on our trading style and the currency pair that you wish to trade are vital in understanding when you should be trading. Of course, you also need to think about yourself, if you are going to struggle to get up in the middle of the night each night, then that pair and trading session may not be the best one for you. So pick one that works for you and then build on it.