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The foreign exchange market is a global that operates 24 hours a day. As a result it is difficult for a trader to track every single market movement and provide responses to the continuously. Timing is very important in currency trading. For this purpose it is imperative to note the amount of market activity around the clock in order to maximize the number of trading opportunities during the trader’s market hours. A currency pair’s trading range is also dependent on geographical location and macroeconomic factors.
Factors which determine the preferable time to trade Forex
The preferable time to trade forex currencies depends upon a number of factors which include:
Your system, and which time frame it works in.
Your preference for amount of time taken to trade, whether you want it in discreet blocks of time or watch the trade less frequently but adjust the orders in odd times of the day.
The time zone you live in and whether you're awake at the times the currency markets are active.
The typical trading activity of major currency pairs in different time zones vary and depend upon their volatility:
Asian region (Tokyo) 7 P.M.–4 A.M. EST
Forex trading in Asia is conducted in major regional financial hubs like Hong Kong, Singapore and Tokyo. Tokyo takes the largest market share, followed by Hong Kong and Singapore. Tokyo is one of the most important dealing centers in Asia. It is the first major Asian market to open. Many large participants use the trade momentum there to assess market dynamics and devise their trading activities.
European region (London) 2 A.M.–12 P.M. EST
London is the largest and most important dealing center in the world, with a market share at more than 30 percent. Most of the dealing desks of large banks are located in London. Most of the major Forex transactions are completed during London hours due to the market’s high liquidity and efficiency. There are a large number of market participants performing trade with high transaction values. London is the most volatile Forex market of all.
U.S- European Overlap 8 A.M.–12 P.M. EST
The Forex markets are most active when the hours of the world’s two largest trading centers overlap that is U.S and Europe. The amount of trading between 8 a.m. and noon EST constitute 70 percent of the total average share of trading for all of the currency pairs during the European trading hours and 80 percent of the total average share of trading for all of the currency pairs during U.S. trading hours. Volatile prices and wide ranges are an important feature of the U.S-European market Overlap.
European- Asian Overlap 2 A.M.–4 A.M. EST
The least trade activity is in the European–Asian overlap. Trading is extremely less during these hours.