The Best Time to Day-Trade the USD/JPY Forex Pair
Just because the global foreign exchange (forex) market is open 24 hours a day doesn't mean every one of those hours is worth trading in. The U.S. dollar/Japanese yen (USD/JPY) trade has certain hours that are acceptable for day trading because there's enough volatility to generate profits that are likely greater than the cost of the spread and/or commissions. But the best day traders don't want just "acceptable hours" to trade; they want to be trading the best hours of the day—those that offer the best bang for their buck. To be efficient and capture the largest intraday moves day traders hone in on, traders should focus only on specific hours of the day.
Activity During Trading Sessions Around the Globe
Due to global time zone differences, there is always a forex market open for business somewhere during the week. On Sunday night (in the U.S.), the Asian and Australian markets open first, facilitating trading. Then Europe opens. Then North America. So there are always traders, banks, or businesses willing to trade around the clock.
Not all global markets actively trade all forex pairs or currencies, though. Therefore, different forex pairs see hiring trading activity at different times of the day.
When London is open for business, pairs that include the euro (EUR), British pound (GBP), and Swiss franc (CHF) are more actively traded. When New York is open for business, pairs that include the U.S. dollar (USD) and Canadian dollar (CAD) are more active.
The USD/JPY pairing is a bit odd in this regard. The yen and the U.S. dollar are highly traded currencies, so this pair typically sees relatively stable action throughout the day, with a few peaks and troughs in volatility. Session times are shown at the ForexMarketHours tool, which defaults to Greenwich Mean Time. You can select your own time zone (or your forex broker's time zone) instead.
Note that there is a shift due to daylight saving time. During the warmer months in the Northern Hemisphere, trading hours for New York and London slide forward an hour. When daylight saving time rolls around, if you are uncertain about when markets open and close, check the market hours tool for confirmation.
Times to Avoid Trading the USD/JPY
An hourly volatility chart shows how many pips—hundredths of a yen—the USD/JPY pair moves each hour of the day.
Price movement activity is relatively stable through much of the day, although there are periods with noticeable drops in volatility. Avoid day-trading during those low-volatility times because if you trade then, the pip movement may not be large enough to compensate for the spread and/or commissions you'll pay to make the trade.
Trading in this pair is subdued between 21:00 GMT and the Tokyo open at 00:00 GMT, so that's not ideal for day-trading. As Tokyo winds down and before London opens, the pair sees another drop in volatility between 03:00 and 05:00. This is another time to avoid trading.
Average daily volatility changes over time, but those hours of least volatility typically do not change. To check whether other times of the day have been showing unusually low—or high—volatility, look at volatility statistics on Mataf. Click on a currency pair for an updated chart.
To see how many pips a forex pair is moving in a typical day, apply an average true range (ATR) indicator to a daily chart. If the ATR is set to 15, the ATR will show the average daily volatility over the last 15 days.
Ideal Times to Day-Trade the USD/JPY
If you are able to, day-trade the USD/JPY between 12:00 and 15:00 GMT. London and New York are both open for the bulk of this period. Even though Tokyo isn't open, this three-hour window typically presents the largest price moves of the day. (Sometimes volatility remains high for another hour, until 16:00, for a four-hour window.) This means greater profit potential, and spreads are also typically tightest during this time.
The bottom line is trading between 12:00 and 15:00 maximizes your efficiency in trading the USD/JPY. This period often provides the most opportunities to deploy trading capital, as the increased volatility provides more opportunities to trade.
There may occasionally be other times that produce good-sized moves for weeks or months at a time. Regularly check volatility statistics on Mataf to see what times of day are most active. Since the USD/JPY is actively traded around the clock, there may be some other times you can take advantage of.