The forex market is often described as the market that never sleeps, but this could apply to virtually any market. Whatever financial instrument you want to trade, there is always a market open somewhere in the world. Here is a guide to the different markets, and when is the optimum time to trade on them.
There are good and bad times to trade. If you get it wrong, it could impact your profit margins and make it very difficult to become a successful trader.
The best time to trade forex depends on several factors. Many traders only trade during periods of low volatility. This is the best strategy if you want to see consistent success, as low volatility equals higher returns. The period of least volatility is 1400 to 0600, Eastern Standard Time. However, this will depend on the currency pair you are trading.
For example, the best time to trade GBPUSD is very different from any pair featuring the Japanese Yen, as increased volatility during peak Asian trading hours will have an impact on baseline profits.
Experts concur that trading European currencies outside of peak forex market hours yields the best results. Whereas Asia-Pacific currencies are harder to judge, as Asian markets don’t have distinct periods of low and high volatility in the same way.
This is where a demo account will pay dividends. Run test trades at different times of the day. See if you can spot any patterns and use this information to make smarter trading decisions.
Commodity trading operates to a different set of rules. Many commodity traders trade in the morning. They use this time to analyze market data and check which direction the market is moving. However, the best time to trade will depend on which commodity you are working with and which time zone you are operating in. For example, Indian oil and gas traders often make trades in the evening, which equates to morning (New York session) in the US. This is when the most important news announcements hit the media.
Stock Market Indices
Stock markets see the most activity at the beginning and end of the day. For obvious reasons, this will depend on which market you are trading in. The New York Stock Exchange is open between 0930 and 1600 EST and the FTSE 100 is open 0800 – 1630 GMT. Since market index trading is often a long-term investment, the optimal trading time is less of a concern for traders.
If you are interested in trading futures, there are benefits to be had from trading in the period of overlap that occur when one market closes and another market opens. This also applies to forex trading. When two markets overlap, such as the period when the FTSE closes and the NYSE opens, market liquidity increases and there are more people trading.
Practice different trading strategies with a demo account. That way you can work out which is the optimum trading time for your preferred instrument.