Best time to trade in Forex Market

Best time to trade the forex (foreign exchange) market is when it's at its most active levels. That's when trading pair spreads (the differences between bid prices and ask prices) tend to narrow. In those situations, less money goes to the market and forex brokers facilitating currency trades, which leaves more money for the traders to pocket personally and less time to cover the spreads.

Major Forex Exchanges

Four major forex exchanges are located in London, New York, Sydney, and Tokyo. Forex traders need to commit their hours to memory, with particular attention paid to the hours when two exchanges overlap. When more than one exchange is open at the same time, this increases trading volume and adds volatility—the extent and rate at which equity or currency prices change. The volatility can benefit forex traders. Traders generally fear market volatility. In the forex game, however, greater volatility generates greater payoff opportunities.

Worldwide Forex Markets Hours

Forex market is fully electronic and open somewhere in the world between 5 p.m. Sunday and 5 p.m. Friday Eastern Standard Time (EST). Each exchange has unique trading hours from Monday through Friday. From the average trader's perspective, the four most important time windows (all EST) are as follows:

· London: 3 a.m. to 12 p.m. (noon)

· Sydney: 5 p.m. to 12 a.m. (midnight)

· Tokyo: 7 p.m. to 4 a.m.

Each exchange functions independently, they all trade the same currencies. So, when two exchanges are open, the number of traders actively buying and selling a given currency greatly increases. The bids and asks in one forex market exchange immediately impact bids and asks on all other open exchanges. That reduces market spreads and increases volatility, including in the following windows:

• 8 a.m. to noon, with both the New York and London exchanges open

• 7 p.m. to 2 a.m., with both the Tokyo and Sydney exchanges open

• 3 a.m. to 4 a.m., with both the Tokyo and London exchanges open

New York exchange is especially important for foreign investors. Its trades involve the U.S. dollar, which is involved in 90% of all currency trades. Movements of the dollar can have a strong ripple effect around the world.

Certain economic data that can move the market has a steady release schedule. It includes Jobless Claims, Consumer Price Index (CPI), Trade Deficits, and Consumer Confidence and consumption. Knowing when any fundamental news is set for release can help time when to trade in forex market.

Forex traders should proceed with caution when trading in live market, because currency trades often involve high leverage rates of 1 to 1:1000 While this ratio offers awesome profit opportunities, but it also comes with an investor's risk of losing an entire investment in a single trade.

Which Are the Most Liquid Currencies?

The most traded currencies in the world include the U.S. Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Australian Dollar (AUD), Canadian Dollar (CAD), and Swiss Franc (CHF). The four major pairs at present are the EUR/USD, USD/JPY, GBP/USD, and USD/CHF.

Summary

It is important to take advantage of market overlaps and keep a close eye on news releases when setting up a trading schedule. Traders looking to enhance profits should aim to trade during more volatile periods while monitoring the release of new economic data. This balance allows part-time and full-time traders to set a schedule that gives them peace of mind, knowing that opportunities are not slipping away when they take their eyes off the markets or need to get a few hours of sleep.