Updated: Jul 17
One of the most important factors in forex trading is timing. The right timing can significantly impact your profits. In this article, we'll discuss the different trading sessions that can affect the forex market. we’ll also explain the importance of timing in forex trading and how to maximize our profit using trade timing.
What are the best trading times in Forex?
The Forex market is open for trade at almost any time of day. However, there are times when the market provides better conditions than most. As a result, you should capitalize on making the most of such opportunities by employing a strategy that gives you the biggest edge at those moments.
Forex Market Hours
The forex market is open 24 hours a day, 5 days a week, but not all markets are open at the same time. It's important to know what time it is in the different markets around the world, as this can affect the volatility of the currency pairs you're trading.
The forex market is divided into four main trading sessions, each of these sessions has its own unique characteristics, and the currency pairs that are traded during each session can vary. Here is a breakdown of the different trading sessions and the markets they affect:
Sydney session: The Sydney session is the first session of the day, and it starts at 5 pm EST and closes by 2 am(10 pm - 7 am WAT). This session is relatively quiet, and there is not much volatility in the market. The currency pairs that are most active during this session are AUD/USD, NZD/USD, and USD/JPY.
Tokyo session: The Tokyo session starts at 7 pm and closes by 4 am EST(12 am - 9 am WAT), and it is during this session that the Japanese yen is most active. The currency pairs that are most active during this session are the USD/JPY, EUR/JPY, and AUD/JPY.
London session: The London session starts at 3 am and closes by 12 am EST(8 am - 5 pm WAT), and this is when the European markets open. The London session is the most active session of the day, and it is during this session that the most volatility occurs in the market. The currency pairs that are most active during this session are EUR/USD, GBP/USD, and EUR/GBP.
New York session: The New York session starts at 8 am and closes by 5 pm EST(1 pm - 10 pm WAT), and it is during this session that the US dollar is most active. The currency pairs that are most active during this session are the USD/JPY, EUR/USD, and GBP/USD.
In West Africa Time (WAT) which is the timezone used in Nigeria, the trading sessions are as follows:
Sydney Session(8:00 pm - 5:00 am)
Tokyo or Asian Session (12:00 a.m. – 9:00 a.m.)
London or European Session (8:00 a.m. – 5:00 p.m.)
New York or North American Session (1:00 p.m. – 10:00 p.m.)
In Nigeria, the trading week begins at 11:00 p.m. on Sunday and ends at 10:00 p.m. on Friday.
It's important to note that there is some overlap between the different trading sessions. While the market becomes very active when any of these three sessions are open, it becomes more active when one overlaps the other. For example, the London session and the New York session overlap for a few hours, which can create even more volatility in the market.
The best time to trade forex is during the London and New York sessions, as this is when the most volatility occurs in the market.
Best Trading Hours in Nigeria
Ideally, no one wants to stay up all night and day monitoring the market. So an effective strategy would be to target the market’s most active hours, incorporate proper risk management, and aim for blues.
Differences in time zones can make the hot trading hours vary for different locations. So, if you’re not in Nigeria, you should find out the corresponding times for your current time zone.
Once that’s been sorted out, you can target the overlaps between the three major sessions (Tokyo, London, New York). In Nigeria, for example, the overlaps are as follows:
1 hour of overlap between the Tokyo and London sessions (8:00 a.m. – 9:00 a.m. WAT)
3 hours of overlap between the London and New York sessions (2:00 p.m. – 5:00 p.m. WAT)
During this time, there is high liquidity and volatility in the forex market, which can lead to profitable trading opportunities. The excitement really kicks in during the three hours overlap between the London and New York sessions. It is the biggest overlap in the forex market and also features activity between the world’s two largest forex trading markets (London and New York).
All the above factors make London-New York’s overlap the most ideal time to trade in Nigeria, followed by the Tokyo-London overlap (even though Tokyo’s overlap happens first). So if you hit a loss on your first outing during Tokyo-London’s 1-hour overlap, you can regroup and target London-New York’s 3 hours overlap.
It's important to keep in mind that the best trading hours may vary depending on the currency pairs you are trading.
The New York overlap is perfect for participants trading pairs that include the USD, EUR, and GBP.
If you’re struggling with finding the corresponding Forex hot market hours in your location, you can use a “Forex Market Time Converter” tool.
How to Maximize Profits During The Overlaps
We’ve discovered the best times to join the market action. Next, we will figure out how to maximize profit during these times. This is where technique and discipline are instrumental!
Maximizing profits during trading session overlaps in the forex market can be an effective strategy, as these periods often experience increased liquidity and volatility.
Here are some key points to consider for maximizing profits during overlaps:
Focus on Major Currency Pairs: During overlaps, major currency pairs that involve the currencies of the overlapping sessions often see higher liquidity and volatility. For example, during the London and New York overlap, currency pairs like EUR/USD, GBP/USD, and USD/JPY are actively traded. Focusing on these pairs can provide more trading opportunities and potential profit.
Monitor Economic Releases: During overlaps, there may be significant economic releases from both regions. Economic data and news can greatly influence the market and cause price movements. Stay updated on upcoming economic events and their potential impact on the currencies involved. Consider adjusting your trading strategy or timing your trades around these releases to take advantage of price volatility.
Target Only High-Probability Entries: Take only high-probability trades that meet all your trade-entry conditions. Ensure to use a tight stop-loss. It is better not to take any entry at all than to take one that hasn’t met your trade-entry conditions.
Use Shorter Time Frames: During overlaps, shorter time frames, such as 15-minute or 30-minute charts, can be more useful for identifying quick trading opportunities. These shorter time frames capture smaller price movements that can occur during high-activity periods. Combine technical analysis indicators and chart patterns to identify potential entry and exit points.
Employ Breakout Strategies: Overlaps often create breakouts, where prices move out of established trading ranges or chart patterns. Breakout trading strategies can be effective during these periods. Identify key support and resistance levels and wait for price to break above or below these levels before entering a trade. Implementing appropriate risk management measures, such as stop-loss orders, is crucial when employing breakout strategies.
Delete Emotions: Do not fix your trading decisions on your emotions. Instead, they should be rooted in proper market info and analysis. Follow the news and know that the trend is your friend. Objectively trade with the trend, not against it.
Practice Proper Risk Management: As always, proper risk management is vital for maximizing profits during overlaps. Determine your risk tolerance and set appropriate stop-loss orders to limit potential losses. Calculate position sizes based on your risk-reward ratio and account balance. Avoid overexposure and carefully manage your trades to protect your capital.
By understanding market sessions, implementing risk management, and constantly monitoring and adapting, traders can enhance their trading performance. Remember that trading during overlaps also carries increased risks due to higher volatility. Stay disciplined and avoid overtrading or taking unnecessary risks. Continuously analyze your trading results and refine your strategies based on your performance during these overlapping periods. With experience and careful planning, you can maximize profits during trading session overlaps in the forex market. With practice and experience, mastering time in forex trading can lead to improved trading outcomes and increased profitability.