Best Time to Day Trade the USD/JPY Forex Pair

Best hours of the day to day trade the USD/JPY

Just because the forex market is open 24-hours a day, doesn't mean every one of those hours is worth trading. The USD/JPY has certain hours which are acceptable for day trading because there's enough volatility to generate profits which are likely greater than the cost of the ​spread and/or commissions. But great day traders don't want just "acceptable hours" to trade, they want to be trading the best hours of the day, or the hours that offer the "best bang for their buck." To be efficient and capture the largest intraday moves day traders hone in, only trading during specific hours of the day.

Day Trading Sessions and Impact on Volatility

major forex market hours in GMT
Forex Market Hours in GMT. ForexMarketHours.com

Due to global time zone differences, during the week there is always a market open for business somewhere. On Sunday night the Asian and Australian markets open first, facilitating trade, then Europe opens, then North America, so there are always traders, banks or business willing to trade around the clock. Not all global markets actively trade all forex pairs or currencies, though. Therefore, different forex pairs are actively traded at different times of the day. 

When London (and Europe) are open for business, pairs that involve the euro (EUR), British pound (GBP) and Swiss franc (CHF) are more actively traded. When New York (U.S. and Canada) are open for business, pairs that involve the U.S. dollar (USD) and Canadian dollar (CAD) are more active. 

The USD/JPY is a bit of an odd pair in this regard. The yen is an actively traded currency, and so is the USD, so this pair typically sees relatively stable action throughout the day with a few peaks and troughs in volatility. Session times are shown on the attached chart, in GMT. To convert to your own time zone (or your forex broker's time zone), use the forex market hours tool

Note that there is a shift due to day light savings time. During the summer months (northern hemisphere) everything slides back an hour on the chart shown. When day light savings times rolls around, if you are uncertain about when markets open and close, quickly check the above forex market hours tool for confirmation.

Avoid These Hours Day Trading the USD/JPY

USD/JPY low volatility market hours
USD/JPY Market Hours Where Volatility Is Lowest. Mataf.net

The hourly volatility chart shows how many pips the USD/JPY moves each hour of the day.

Movement 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.

The USD/JPY is sedate between 2100 and the Tokyo open at 2400, not ideal for day trading. As Tokyo winds down, and before London opens, the pair sees another drop in volatility between 0300 and 0500. This is another time to avoid day trading the USD/JPY. Day light savings may also affect these times in your area. Regularly check volatility statistics on Mafaf (click on a pair to see an updated chart) to confirm which hours are typically quiet or active.

Trade during these hours and the pip movement may not be large enough to compensate for the spread and/or commissions. 

Volatility changes over time. For example, daily average volatility at the time of writing is 129 pips per day. This is quite high historically. Daily average movement could decrease back to 70 pip per day, which means each hour is likely to see lower pip movement. Which hours are most volatile typically do not change, though. The hours discussed above (GMT) should be avoided for day trading, even if volatility increases or decreases overall.

To see how many pips a forex 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 Time to Day Trade the USD/JPY

most active hours for USD/JPY
Most Active Hours for USD/JPY. Mataf.net

There are certain hours to avoid day trading the USD/JPY, but there is also a window of time which is ideal.

If you are able to, day trade the USD/JPY between 1200 and 1500 GMT. London and New York are both open for the bulk of this period. Even though Tokyo isn't open, this two to three hour window (sometimes volatility is high up till 1600, for a four hour window) typically presents the largest price moves of the day. This means greater profit potential, and spreads are also typically tightest during this time. 

The bottom line is, trading between 1200 and 1500 maximizes your trading efficiency when trading the USD/JPY. This period often provides the most opportunities to deploy ​trading capital, as the increased volatility provides more opportunities to trade. Again, note that day light savings may shift the best times forward or backwards by an hour. Check the volatility stats to stay on top of this.

The time frame above typically sees the most action, but there may be other times that produce good sized moves for weeks or months at a time. Regularly check volatility statistics on Mafaf 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. Stick to trading during the hours that see higher volatility--the hours that witness spikes in volatility on the chart (like the highlighted area on the attached chart).

Best Time to Day Trade the USD/JPY

best time to day trade the USD/JPY
lvcandy/Getty Images

If you day trade the USD/JPY, ideally do it between 1200 and 1500 GMT. Trading during this time maximizes profit potential due to the size of the moves, and spreads are typically lower during this time as well. If you regularly monitor intraday volatility, you may find that there are other times during the day which are very active for extended periods, and you may opt to day trade during these times.

If you can't trade during the most active times in the USD/JPY, then look at trading other pairs, such as the EUR/USD or GBP/USD. There are multiple pairs that can be day traded, and the USD/JPY is just one of the options.