What Are the Best Trading Days for Forex?
The best time to trade forex is greatly impacted by a number of factors, which we will dive into later in this article. In short, Tuesday, Wednesday and Thursday are widely considered to be the three best days of the week to trade.
Forex trading is best at the busiest times. This often means the best return on your investment, as well as the most profitable trades. A lot of people are looking to trade forex on these three days of the week, and you can leverage this energy to your advantage. However, it’s crucial to keep in mind that while higher volatility offers more trading opportunities, it also presents a higher risk of losing your money, as the market behaves unpredictably.
What Are the Forex Market Hours of Operation?
London
The London Stock Exchange is open from Monday through Friday between the hours of 8 am to noon and from 12:02 to 4:30 pm GMT. Moreover, the LSE also offers extended trading hours, from 5:05 to 7:50 am and from 4:40 to 5:15 pm GMT.
Tokyo
The Tokyo Stock Exchange is open Monday through Friday from 9:00 to 11:30 am and then from 12:30 to 3:00 pm Japan Standard Time (GMT+9), which is from 12:00 to 2:30 am and from 3:30 to 6 am London Time (GMT).
Sydney
The Sydney Stock Exchange is available Monday through Friday between 10:15 am and 4:15 pm, Australian Eastern Daylight Time (GMT+11), which is from 11:15 pm to 5:15 am GMT. Unlike the Tokyo Stock Exchange, the Sydney Stock Exchange doesn’t close for lunch. It also doesn’t offer pre-market trading or after-hours trading opportunities.
Overlaps in Forex Trading Times
The US and London forex markets overlap from 8 am to noon EST, or from 1:00 to 5 pm GMT. This four-hour overlap sees the highest trading volume and is a great time for trading opportunities.
The Sydney and Tokyo forex markets overlap from 7 am to 9 am GMT. This two-hour time frame isn’t as liquid as the US and London overlap, but still offers ample opportunities for skilled traders.
The London and Tokyo forex markets overlap from 9 to 10 am GMT. This hour-long overlap experiences little trading action mostly because the time frame is very short and most US traders aren’t awake.
The Best Times of Day to Trade Forex
It’s not only important to trade on the best days of the week, but also at the right time of the day. The London session has the single highest volume of trades out of all global sessions. Tokyo and Sydney are other great options, but they do have less action than the London session.
Most experienced forex traders try to limit their trading time to when the London session is happening.
An Overview of the Best Days of the Week to Trade Forex
Sunday to Monday
The way time zones work plays a big role in daily volatility. When it's Monday morning in Australia, it's still Sunday night in Europe, and European and US sessions are not open during this time. The markets are already active, but volatility is relatively low. Since there isn't much economic activity on weekends, it's also unlikely that the market will adjust to new conditions.
Sunday night is the only time of the trading week when gaps occur regularly for currency pairs. Therefore, Sunday is not the best day to trade the forex market. Monday isn't the best day of the week to trade currency either, as the first half of Monday tends to be sluggish.
Midweek
On Tuesday trading quickens and the market experiences its first spike in activity. Market volatility on Tuesday is approximately 120-130% of what it is on Monday. This is why Tuesday is one of the best days for forex traders.
On Wednesdays there is a slight dip in volatility and trading activity tends to be somewhere between what it is on Monday and Tuesday. This happens because of a phenomenon known as swaps.
On Thursdays volatility is at its highest again, which makes it another excellent day for trading forex.
Friday
Fridays can be interesting for forex traders, as the currency pairs that are popular during the Asian and European sessions begin to overlap. They stay almost as volatile as they are on Thursday for the first half of the day. This is mostly true for the EURJPY and the GBPJPY currency pairs. Meanwhile, pairs of North America and Asia Pacific currencies drop in volume. Obviously, this is because of the markets closing on Friday night. Generally, the first half of Friday sees a lot of trading action, and provides good conditions for trading.
However, it’s important to keep in mind that volumes drop significantly in the second half of the day as the weekend approaches.
Best Months to Trade Forex
Now that we’ve reviewed the intraday and intraweek market dynamics, let's take a look at what happens to the forex market throughout the year. The calendar year can be divided into three clear periods of volatility. Out of these three periods, two provide good conditions for trading.
The first good period includes these five months:
- January
- February
- March
- April
- May
After those months, volatility slows down for the duration of summer. The following months may not be very suitable for forex trading:
The pace starts to pick up again after summer, with three months of good forex trading opportunities:
- September
- October
- November
December can be a good month for trading, though there's a noticeable decrease in market activity in the second half of the month. Any holiday period naturally leads to a decrease in trading volumes.
The Summertime Trading Slump
The forex market is at its liveliest when a lot of people are trading, so it’s no surprise that summer isn’t the best time to trade forex. S&P research indicates that summer months show the least returns for most European financial markets, with August being the worst month to trade, since many institutional traders in Europe and North America are on holiday. This leads to bigger and less predictable price swings. The big market movers have to protect their portfolios and returns, which leads to:
- Long-term traders closing their trades over the summer
- A return of trade action when the the autumn comes
If you still want to continue trading in the summer, it’s important to prepare for periods of ups and downs. A range-based system is more appropriate for the summer, as is trading in small intervals, to catch mini-trends. Sooner or later, the summer sideway trend does break.
Autumn Boom and Christmas Freeze
The autumn boom reflects the majority of traders returning to the markets after their summer holidays. Business activity in other industries also picks up around this time. This makes autumn months one of the best times of the year to trade forex. By the second half of December, trading activity slows down again, much like in August.
The few weeks before and after Christmas are the slowest, and it’s not until mid-January that the markets start to pick up again.
Days You Can Take a Break from Trading Forex
Traders usually try to avoid trading Forex on the weekends. Across the world people are taking the weekends off and this means trading volume is at its lowest on Saturday and Sunday. A low volume typically means tough deals and bad forex trading.
Fridays are a bit more mixed, with early morning sessions that can be exciting and action-packed, though that energy quickly fades away as most people jump into an early weekend.
Events That Change Forex Trading Schedule
Most forex traders tend to avoid trading on major holidays, as well as on days when global news events are breaking. Some expert forex traders might be able to leverage the rapidly evolving world of geopolitics, but that’s a skill that you need to develop through years of training.
Key Takeaways
- One of the best times to trade forex is when two sessions are overlapping. These are also the times where major news events come out to potentially spark some volatility and directional movements.
- The European session tends to be the busiest out of the three.
- The middle of the week typically shows the most movement, as the pip range widens for most of the major currency pairs.
- Saturdays and Sundays tend to be the least favourable days for trading forex.
- Most traders tend to avoid trading forex during holidays and around major news events.
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