Lesson 5: When Is the Best Time to Trade Forex?

One well-loved feature of forex is its decentralized nature. With this, traders worldwide can access the forex market throughout the day on weekdays.  

But new traders tend to fall into the trap of accessibility, thinking that just because it’s open, it’s best to execute a trade.  

When you’re trading forex, you must first learn the forex clock to take a position while maximizing the best time for forex trading.

Lesson Highlights

• The forex market operates around the clock during the weekdays due to four major trading sessions.
• Each forex trading session's operation aligns with their respective countries' official business hours.
• Trading the session overlap is ideal for traders who want to capitalize on short-term market movement because of increased volatility.

What Is Session Overlap?

As the name suggests, session overlap happens when two trading sessions cross (or overlap with) one another. In short, it is when two sessions are open at the same time.  

This trading phenomenon creates a heightened trading atmosphere, which results in high trading volume and activities.  

When this happens, you can capitalize on the price fluctuation to gain profits from your position. Your position will experience broad and fast price movement.

If you have the proper forex strategies and risk management techniques, this market direction will surely benefit your position.  

Here are the major trading sessions: 

Sydney-Tokyo Sessions

The Sydney and Tokyo sessions are where the actions start when a new trading day begins. The Sydney session starts at 08:00 PM and ends at 05:00 AM UTC, while the Tokyo session starts at 12:00 AM and ends at 09:00 AM UTC. 

This means the two sessions overlap from 12:00 AM to 05:00 AM UTC. 

Both Australia and Japan have a strong economic power that drives currency exchange rates. In fact, Japan is among the world's major financial center—one reason why traders opt to trade in this session. 

The most traded currency pairs include the ones with Japanese yen in them, which are:

1. USD/JPY 
2. EUR/JPY 
3. GBP/JPY 

During this overlap session, you must be on the lookout for Japan’s economic events that could drive up the spike in JPY’s price movement.  

However, note that the Sydney and Tokyo sessions may not be as active as you want them to be. Remember, both sessions tend to have dried up liquidity as Western traders are mostly away from their trading devices at these hours.  

London-Tokyo Sessions 

Unlike the Sydney-Tokyo overlap, the London-Tokyo overlapping sessions have a relatively deeper liquidity. Both Europe and Japan belong to the largest financial centers globally. 

This overlapping session lasts for an hour, which happens from 08:00 AM to 09:00 AM UTC.  

Also, the London session is the most traded session in the world. Combined with Japan’s economic power, this trading session is surely a hit among traders. 

However, you should note that there’s no large movement during the Tokyo session, especially during the afternoon. This might turn you off if you’re expecting a high level of liquidity in this overlapping sessions.  

The most traded currency pairs include the ones with Japanese yen, European euro, and British pound, which are:

1. EUR/JPY 
2. USD/JPY 
3. GBP/JPY 
4. EUR/USD 
5. GBP/EUR 
6. GBP/USD 

New York-London Sessions 

When the New York and London sessions overlap, you should expect a huge spike in market movement. Not only are the USD and EUR the most traded currencies in forex, these two are also the largest financial center.  

The overlapping session happens from 01:00 PM to 05:00 PM UTC.  

Both countries’ economic tendencies have a significant impact on the forex market. And because of that, many traders want to join the active market trend during the New York and London trading sessions. 

That influx brings out the highest volatility and liquidity due to increased trading volume.  

When these two sessions overlap, it’s best to execute a position in all major currency pairs and some minor pairs with GBP and EUR.