The Best Forex Trading Hours
The best time to trade on the forex (Foreign Exchange) is when the market has the most activity or volatility. When more traders are active, the trading spreads, or the difference between the bid price and the asking price, tend to narrow. This result means that less of your money goes to the market maker, the specialist who trades the currency in question and leaves more money for the buyer and seller.
The 4 Major Exchanges
Active trading markets almost always make for better trading experiences, whether you trade on the forex, the NYSE or any other financial trading market. But for forex traders, there's another good reason for trading when the market is most active: volatility.
As a result of the nature of forex's four major exchanges, New York, London, Singapore, and Tokyo, when more than one exchange is open, not only does trading volume increase, but volatility significantly increases as well.
Although investors often fear volatile markets, volatility, the extent and rate at which an equity or currency price changes, means good news for traders. Without volatility, prices remain constant, and trading cannot be profitable. With volatility comes risk, but also opportunities.
Worldwide Forex Markets Hours
The forex has fifteen independent exchanges worldwide. All of them stay open five days a week, from Monday through Friday. Each exchange has unique trading hours, but from a trading perspective, the four most important exchanges have hours as follows (all times are Eastern Standard Time):
- London: 3 AM to 12 PM (noon)
- New York: 8 AM to 5 PM
- Singapore: 3 PM to 12 AM (midnight)
- Tokyo: 7 PM to 4 AM
Forex Trading Hour Overlaps
While each exchange is independent of the other, they all trade the same currencies. This means that when two of these four large exchanges are open, the number of traders actively buying and selling currencies increases significantly.
Bids and asks in one forex market exchange get immediately reflected in the bids and asks on any other open exchange, which both reduces market spreads and increases volatility.
When you look at the exchange hours listed above, it becomes clear that trading hours on major exchanges occur in two markets simultaneously from:
- 8 AM to 12 PM (noon) EST, with both New York and London exchanges open
- 3 PM to 5 PM, with both New York and Singapore exchanges open
- 7 PM to 12 AM (midnight) EST, with both Tokyo and Sydney exchanges open
- 3 AM to 4 AM EST, with both Tokyo and London exchanges open
The Best Forex Trading Hours
These four overlaps normally make the three best times to trade. Of these, the most favorable trading time is the 8 AM to noon overlap when both New York and London exchanges are open. These two trading centers account for more than 50 percent of all trades on all 15 exchanges worldwide.
Special market situations can arise, however, making any hour of the day or night a favorable trading time. Normally, for example, from 5 PM to 6 PM EST is not a promising time to trade.
The only major open exchange is the Singapore exchange, which accounts for less than 10 percent of annual forex trading volume. If, however, there was a political or military crisis anywhere in the world that developed during this hour, volatility and trading volume would predictably spike in response, making this a very favorable time to trade.
Best Time Doesn't Always Mean Profitable
If you're just beginning to trade forex, it's a good idea to proceed cautiously. Currency trades involve high leveraged, sometimes as much as 1,000 to 1.
This makes the idea of a big win appealing, but also means you can lose most of your money on a single trade. A 2014 Citibank study concluded that although 84 percent of forex retail traders believe they can make money, in actuality, only 30 percent break even or better.
It's often a good idea to open your forex account at a firm that offers new investors trading on a demo platform, where you can have your results tallied, but your money, gains and losses are imaginary. Once you practice, test strategies and see how you're doing in your demo account, you'll know better how to proceed with live trading.
Disclaimer: The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.