What’s the best time of day to trade?

Bests time to trade - FX and Futures

For traders who have full-time jobs and trade only part-time or as a hobby, finding the right time of day to trade can be tricky. They need to balance commitments to work and family with finding time to trade. Trading at the best possible time of day becomes crucial. This makes the forex market look very lucrative.

The forex market is open 24 hours a day, 5 days a week. As one regional exchange closes, another one opens. This offers almost unlimited opportunities, with trading possible at all hours of the day and night. However, good decision making requires a trader to be well-rested and alert. The best strategy for traders is to chose one market session that works for them, allowing them to work, trade, socialize, and sleep, and stick to it.

So which market session should you trade?

Making this decision has much to with your existing lifestyle, family or other commitments. For example, if you have a regular nine-to-five day job, your boss will not be pleased to find you trading during work hours. If you are self-employed, you might have your own tasks to work on during the day. Therefore, trading at those times is probably not optimal.

The forex market is unique because of its hours of operation. The week begins at 6 pm EST on Sunday and runs until 5 pm EST on Friday. One of the best times to trade is during overlaps in trading times between open markets. There are several reasons for this. First, the markets tend to be slightly more volatile during overlaps. Although too much volatility is bad, a small amount is very good for a trader because it creates opportunities to make a profit. Secondly, there tend to me more buyers and sellers during market overlaps. This makes it easier to find someone to buy from or sell to.

Let’s look at an example

Let’s say there’s a trader living on the east coast in the US, with a standard day job and a family. A good option would be to trade the pre New York session, which is around 6 am EST. Around this time, markets in Europe and the Middle East are open, while North American east coast markets are in pre sessions. There’s often a repetition in market movements, as participants are gearing up their orders and positions for larger moves when the market officially opens around 8-9 am EST.

This repetition in market movements, along with slightly increased volatility, means that the trader doesn’t have to sit and trade all day. They can get done all the trading they want to in only 2 or 3 hours.

Trading the pre New York session is also useful because it allows this trader to have a day job and time for family. By 9 or 10 am, they’re ready to be at work, already awake and alert. In the evenings, they have time for family, socializing, or doing more market research.

Summary

Choosing a time to trade has everything to do with the way you live. There is no one right approach to choosing a time. Some people are happy to wake up early to trade before work, while others prefer to trade in the evenings after work. It is important to take advantage of market overlaps and to keep an eye on news releases and time zone factors which affect both sides of a currency pair when setting up a trading schedule.