There are certain trading times in the Forex market that allow you to arguably make more money and profit. Despite the fact that the currency market is open 24 hours a day (excluding weekends), there are specific times when the FX market is moving faster.
The main time zones for trading are EDT, GMT and JST (New York, London and Tokyo). Although each main trading time zone bears a specific time bracket, there are always typically two trading time zone brackets that are overlapping with each other.
The New York trading time zone bracket runs from 9AM to 5PM EST. The London trading time zone bracket runs from 3AM to 12PM EST. The Tokyo trading time zone bracket runs from 7PM to 4AM. The Forex market is quite obviously going to be more active during the overlaps of the main trading time zone brackets. These brackets are generally known as trading “sessions”.
Also, in terms of trading, it is generally the best time to trade in the middle of the business week as that is when the Forex market is the most active (more specifically between Tuesday and Wednesday). The worst times to trade Forex (due to low activity and movement) is typically on any Friday, Sunday or during a holiday.
“Pips” can be used to measure the minimum price movement of an exchange rate (in other words, the minimum change an exchange rate can make). When you buy a product in a store, you pay the price of the product to the nearest penny – this means that the pip (percentages in point) is equal to 1 penny in ordinary transactions. However, in Forex, the value of exchange rates are priced to 4 decimal places (for most major currency pairs). The smallest change possible is that of the last decimal place, so 1 pip = $0.0001. It could be said for most currency pairs that the smallest change possible is equal to 1/100th of 1 percent (AKA 1 basis point).
If you want to know how to calculate how much each pip will be worth to you as a trader and investor, simply divide 1 pip in decimal form (0.0001) by the exchange rate of the currency pair you are trading and then multiply it by the notional amount (AKA face amount) of the trade you are making.
Going back to the Forex market, there are certain currency pairs that are the most active in each trading session, with the highest amount of pips in each session.
The London session (running from 3AM to 12PM EST) and its main currency pairs (each with their average level of activity, in pips):
– GBP/CHF (145 pips)
– GBP/JPY (140 pips)
– USD/CHF (115 pips)
– GBP/USD (110 pips)
– USD/CAD (90 pips)
– EUR/USD (80 pips)
– USD/JPY (75 pips).
The New York session (running from 9AM to 5PM EST) and its main currency pairs (each with their average level of activity, in pips):
– GBP/CHF (130 pips)
– GBP/JPY (120 pips)
– USD/CHF (110 pips)
– GBP/USD (90 pips)
– USD/CAD (80 pips)
– EUR/USD (75 pips).
The Tokyo session (running from 7PM to 4AM EST) and its main currency pairs (each with their average level of activity, in pips):
– GBP/JPY (110 pips)
– GBP/CHF (90 pips)
– USD/JPY (75 pips)
– USD/CHF (65 pips)
– GBP/USD (60 pips)
– AUD/JPY (55 pips).
As you can see, the London session tends to be the most active, closely followed by the New York session and then the Tokyo session.
In conclusion, although the Forex market is open 24 hours a day, there are certain times during the day or week When The Forex market is most active and best to trade in. More specifically, there three main trading sessions that run through each trading day. We can use pips to measure the extent to which each session is active and we can choose optimal times to trade Forex, by choosing a time that preferably coincides with the overlap of two main trading sessions.