What Are the Forex Trading Hot Spots?

The time when the foreign exchange markets attract more trade, increasing volatility and liquidity, is considered to be the trading hotspot. However, this hotspot also depends on the forex exchange pair you wish to trade in. With the increase in demand and supply, the difference between the asking price and bid price narrows down. Certain currency pairs reach the peak of their trading at certain points of time during the day, depending on which exchanges across the world are open for business. The world has 4 major Forex exchanges.

The Major Forex Exchanges

An active trading market provides for an optimal trading experience. Volatility in the forex market also brings trading opportunities, especially in the most active markets. There are fifteen independent foreign exchange markets across the world. They operate five days a week, from Monday to Friday. But there are four major trading sessions:

  • London: 8AM to 5PM (GST)
  • New York: 1PM to 10PM (GST)
  • Sydney: 9PM to 6AM (GST)
  • Tokyo: 12AM to 9AM (GST)

On the occasion when more than one session is open at the same time, supply and demand increase, driving trading volume and volatility.

When Trading Hours Overlap

Despite being independent of each other, the same currency pairs might be traded across sessions at different times of the day. When the trading hours of two time zones overlap, there is usually a steep rise in trading volumes.

The ‘ask’ and ‘bid’ price of one session affects the ‘ask’ and ‘bid’ price of the other, while the market spread narrows, thereby increasing fluctuations in prices.

The Best Forex Trading Hours

Overlap makes the best time to trade forex. And, among the overlaps, it is the overlapping of the London and New York sessions that makes for the best trading hours. This overlap period accounts for over 50% of all forex trade across all trading sessions around the globe.

At the same time, special market situations, resulting from policy change and other political or military events, can make any hour or time of the day favourable for trading. This is why traders are always recommended to stay updated on geopolitical events and economic releases.

Each forex pair is active when one of its markets is active and is most active when more than one market is open.

  • The EUR/USD pair is active between 7 AM to 4PM GMT, while the most active hours usually are from 12 PM to 3PM GMT.
  • The GBP/USD pair is active between 7 AM to 4PM GMT, while being the most active usually from 12 PM to 3PM GMT. This pair is also quite active between 7AM and 9AM.

Best Days to Trade Forex

It is hard to determine which days of the week are best to trade forex. Mondays generally don’t show a lot of movement, although Monday usually decides the path for the rest of the week. The momentum starts building on Tuesday, when a lot of movement is witnessed. Friday sees a lot of traders exiting positions, so it isn’t a suitable day for day trading.

Tuesday, Wednesday and Thursday may be considered the best days for trading forex. Not every day or week has the same outcome, however. You may even witness high momentum on a Monday or Friday due to an economic or political event. So, develop your trading strategy and stick to it, rather than trying to time the markets.

The London Trading Session

The active trading hours of this session is 8 AM to 5 PM, GMT. According to a report by IFS London, this session accounts for over 34% of global trading and majorly influences forex prices. The London session overlaps with both the New York and Tokyo sessions. The London session also provides higher liquidity and is a good market to start with.

  • Tokyo-London Overlap: Overall, these markets are open from 12AM to 5 PM GMT. But they just overlap for an hour between 8AM and 9AM GMT. It is a pretty quiet period, since the day is just starting in London, while Tokyo is on the verge of closing.
  • London-New York Overlap: The London and New York sessions occur between 7AM and 4PM GMT, although the most active hours are usually from 12PM to 3PM GMT. The GBP/USD pair is also very active between 7AM and 9AM. This is said to be an overlap not meant for beginners, due to high fluctuations. Over 70% of all forex trade takes place when these two sessions overlap, since the USD and EUR are the most popular currencies to trade in.

The Tokyo Trading Session

The Tokyo session accounts for the most of the trade in the Asian markets. Liquidity is, however, not as high as that witnessed in the London and New York markets. The most traded currency pairs traded during this session are the AUD/USD, AUD/NZD, JPY/USD, NZD/JPY NZD/USD, AUDJPY and NZD/USD. The price fluctuations are also relatively moderate. This session usually sets the tone for the rest of the day. Events taking place in this session help traders to strategise accordingly for the other forex markets.

Trading opportunities in the forex markets do vary on a day-to-day basis as well. So, traders don’t really need to wait for the perfect day or hour. The forex market is highly affected by global occurrences, although some currencies are seen to be more stable than others. Beginners could consider investing in stable currencies or markets with high liquidity like the London and New York markets.



If you liked this educational article please consult our Risk Disclosure Notice before starting to trade. Trading leveraged products involves a high level of risk. You may lose more than your invested capital.