What forex trading session is it now? – Many traders are asking about it, so let Prof FX explain it to you.
Forex is a market openned 24h/24, from Sunday night to Friday night for individuals. During the day, there are periods with more liquidity and more volatility. These periods are better to trade on Forex. During these periods, several markets are openned in the same time.
There are three big sessions and two overlap periods (CET hours)
Asia 01:00 – 10:00
Europe 08:00 – 18:00
US 14:00 – 23:00
Overlap Period Asia / Europe: 08:00 – 10:00
Overlap Period Europe / US: 14:00 – 18:00
It is therefore advisable to trade during these overlap periods. However, everything depends on your trading method. Indeed, a scalper seeks significant volatility while a trader playing trends seek to avoid periods of high volatility. It will therefore avoid periods of recovery.
A day on the Forex has several sessions. These sessions are in agreement with GMT (Greenwich Mean Time) of London – or with EST ( ‘Eastern Standard Time’) of New York, which is GMT-5.
If you are on the west coast of the United States then you must use PST ( ‘Pacific Standard Time’) which is GMT-8. In France, the trading hours in winter time for Paris is GMT +1 and GMT +2 in summer time.Here is a chart that showing in detail the various places and hours of cotations:
The most conducive time to trade a particular pair also differ depending on the currency processed. Thus, to trade the EUR / USD or GBP / USD, the best time is between 14pm and 17pm. These pairs will be more volatile. Indeed, during this time period, most economic indicators on the dollar will be published. In parallel, it is also the first hours of quotations of New York.
However, to trade the AUD or JPY, you should wait between 1am and 7am. Indeed, economic indicators of the pairs involved will occur during the night. Moreover, from 1am, places of Sydney and Tokyo open, then Singapore at 3am. Of course, these currencies may be handled throughout the day but it is during these time period that there will be more movement on the parities concerned.
Because of hours of overlap that may exist between different places, the most suitable hours to trade each pairs can be different. Thus, to trade, the EUR / USD or GBP / USD it is between 14 pm and 17 pm that there will be more movement. To trade AUD or YEN, you should wait between 3am and 7am. Of course, these currencies may be handled throughout the day but it is during these overlap periods that there will be more movement on the parities concerned.
It should be noted that between 9am and 17pm the majority of transactions are made, Paris, London and New York being the most important places in terms of transaction volume as shown by the graphic below which represent the total distribution of the global volume of transaction in 2007 :
This study has been made by the BIS (Bank for International Settlements) between 2002 and 2005 shows the volatility (highest – lowest of the session) of the various currency pairs for the different trading sessions (GMT+1 – Paris Time)
11:00 p.m. to 11:00: Opening hours in Asia
The financial place of Tokyo is the largest in Asia in terms of trading volumes. It therefore seems natural that the yen is one of the most traded currencies during this trading session. Other financial markets also play an important role in the region namely Singapore and Hong Kong.
Currency pairs recommended for investors seeking high volatility: USD / JPY, GBP / CHF and GBP / JPY are the most volatile pairs during the Asian session. These pairs are recommended for speculators looking to make big profits in minimum time
Currency pairs recommended to investors seeking low volatility: EUR / GBP, NZD / USD and AUD / USD are the less volatile during the Asian session. These pairs are recommended for cautious investors looking for the trend.
08:00 a.m. to 18:00: Opening hours in Europe
The financial place of London is the biggest one on Forex in terms of trading volumes (41% of total transactions in 2007). It therefore seems natural that the British Pound is the one of the most traded currencies during this trading session. Other financial markets also play an important role in this region namely New York and Zurich.
Currency pairs recommended for investors seeking high volatility: GBP/JPY, GBP/CHF, GBP/USD but also the USD/CHF are the most volatile pairs during the European session with an average volatility of 150 pips for some. These pairs are recommended for speculators looking to make big profits in minimum time
Currency pairs recommended to investors seeking low volatility: EUR/GBP, NZD/USD, AUD/USD and EUR/CHF are the less volatile during the European session. These pairs are recommended for cautious investors looking for the trend.
13:00 a.m. to 23:00: Opening hours in the US
The financial place of New York is the second biggest one in terms of trading volumes. With London still opened at the beginning of the trading session, the volumes of transactions are very high until 18:00.
Currency pairs recommended for investors seeking high volatility: GBP/USD, USD/CHF and GBP/JPY are the most volatile pairs during the US session with an average volatility higher than 100 pips. These pairs are recommended for speculators looking to make big profits in minimum time
Currency pairs recommended to investors seeking low volatility: EUR/GBP, NZD/USD, AUD/USD and EUR/CHF are the less volatile during the US session. These pairs are recommended for cautious investors looking for the trend.
08:00 a.m. to 11:00: Simultaneous Europe/Asia
During the morning session, the most volatile currencies are GBP and CHF because the financial center of London and Zurich open both.
Currency pairs recommended for investors seeking high volatility: GBP/CHF, USD/CHF and GBP/JPY are the most volatile pairs during this simultaneous session with a volatility around 100 pips. These pairs are recommended for speculators looking to make big profits in minimum time
Currency pairs recommended to investors seeking low volatility: EUR/GBP, NZD/USD and AUD/USD are the less volatile during this simultaneous session. These pairs are recommended for cautious investors looking for the trend.
13:00 a.m. to 18:00: Simultaneous Europe/US
During the session of the afternoon, the most traded currencies are GBP and JPY. At 18:00, the financial place of London which is the most important Forex place closed and many operators are positioning themselves with the closure of London and also play the yen to take advantage of larger movements on this currency during the night (due to the opening of Asians places).
Currency pairs recommended for investors seeking high volatility: GBP/CHF, USD/JPY and GBP/JPY are the most volatile pairs during this simultaneous session with an average volatility of 60 pips. These pairs are recommended for speculators looking to make big profits in minimum time
Currency pairs recommended to investors seeking low volatility: EUR/GBP, AUD/USD et NZD/USD are the less volatile during this simultaneous session. These pairs are recommended for cautious investors looking for the trend.
Conclusion :
The European session is the most volatile, but contrary to what one might think, the morning 8:00 am to 11:00 is more volatile than the session from 13:00 pm to 18:00.
The most volatile pairs throughout the day are the GBP/CHF and GBP/JPY. It should be noted that pairs quoting the CHF are very volatile especially on the USD/CHF. The GBP is the most volatile currency.
The AUD and NZD suit much better investors looking for trends more than volatility.