An ideal trading environment for foreign exchange is when trading volume is at its highest during periods of high market activity. Spreads tend to narrow during this time. In these cases, the market makers that facilitate currency trades receive a smaller share of the profits, which means that the traders themselves receive a larger share.

Using currency pairs on the FX market, traders can compare the value of one currency with that of another. Currency pairs are divided into the ‘base’ and the ‘quote’ currencies, with the former being the first-named and the latter the second. The quote currency’s price is shown with the base currency’s value.

It’s the four most frequently traded currency pairs known as “major pairs.” The major currency pairs are USD/JPY, USD/CHF, GBP/USD, and EUR/USD. ‘The G10 currency group includes these four main currency pairs, all of which can be exchanged for one another.

Understanding the Forex Market Clock

Currency trading can be done at any time of day or night, which adds an element of convenience to the process. As a result of round-the-clock trading, investors from all over the world can trade at any time of day or night. However, when it comes to forex trading, not all hours are created equal.

Many individual and institutional traders benefit significantly from a 24-hour forex market because it ensures liquidity and the ability to trade at any time. Even though currency trading can take place at any time, a single trader can only keep track of one position at a time.

In the absence of a trader present, a spike in market volatility might lead to a move against an existing position, resulting in missed chances or worse. For this reason, a trader must be aware of market volatility and determine when it is best to minimize this risk based on their trading style.

It is possible to access the foreign exchange market at any time between 5 o’clock Sunday and 5 o’clock Friday Standard Time (EST). From Monday to Friday, each exchange’s trading hours are different. According to a typical trader, the four most crucial time frames are:

• Tokyo: 7 PM – 4 AM
• London: 3 AM – 12 PM 
• Sydney: 5 PM – 12 AM
• New York: 8 AM – 5 PM

All of the exchanges deal in the same currencies, even though they operate independently. A currency’s trading activity rises dramatically when two exchanges accept orders. In the forex market, the bids and asks on one open exchange immediately impact all the others.

When to trade forex?

• Monday afternoon

In terms of trading, Monday mornings may be best avoided, but Monday afternoons are a different matter. Because trading volume is increasing in the market, this is the case. Although the forex market isn’t expected to be at its most active during this time, you should at least take a look when Monday afternoon rolls around.

When several trading sessions overlap, London is the busiest, followed closely by New York. Because of this, you may expect the overlap between trading sessions to be a busy one that offers many trading opportunities. Professional traders (or full-time traders) often regard 14:00 GMT to be the best time to enter the market, as London is closing and many are anticipating the shift to New York’s time zone. Despite the choppy and unpredictability of price movements, the giant swings provide greater profit opportunities.

Even though it isn’t as popular as London/New York, trading between 12:00 and 07:00 GMT between Tokyo and Sydney is still a good idea.

• High liquidity times

Even though the forex market tends to pick up steam on Monday afternoons, its liquidity reaches its peak on Tuesday at the earliest. Tuesday mornings through Thursday mornings are the busiest trading days on the forex market! If you’re looking for liquidity, limit your trading to the middle of the week, when the volume is at its highest.

• London Session

When it comes to currency trading, there is no better session than the one in London. A wide range of trading options is available due to the abundance of liquidity and tight spreads. But, the wrong currency pairs can lead to a lack of movement in the market and a lack of regard for the market’s movement. This is why it is so critical to select your forex pairs carefully.

The best currency pairs to trade in the early hours of the London session will be those backed by the British pound or the euro. Included will be the Euro (EUR), EURJPY, GBPCHF, GBP/USD, GBPNZD, and other currency pairs. Toward the end of the London session, the Ny exchanges will open, and USD pairs will become a viable option.

In the New York trading session, USD, GBP, and EUR are the best currency pairs to buy and sell. Major crosses like the USDJPY and GBPUSD are ideal for forex traders because of their high liquidity and volatility. You should steer clear of currency pairs like AUDNZD that will not be affected by the New York session.

Automated trading

When using an automated trading system, traders can program-specific rules for trade entry and exit, which are then executed automatically by a computer using terms like “system trading,” “mechanical trading systems,” “automated trading,” and even “algorithmic trading.” Various platforms estimate that as much as 70% to 80% of shares traded on US stock exchanges are transacted by automated trading systems.

Automatic trading systems allow computers to execute and monitor trades based on trader-defined rules for entry, exit, and asset allocation. Since trades are placed automatically when certain conditions are met, strategy automation is one of the most appealing aspects of this trading method. If you want to use an automated trading system, you’ll need to use a direct access broker’s software and write any specific rules in that platform’s proprietary language. Take a look at the best VPS for forex trading.

Conclusion

Keep an eye out for news releases and market overlaps when building a trading timetable. Profit-seeking traders should look to trade during moments of high volatility while keeping an eye on new economic data. Full-time and part-time traders can benefit from a work-life balance because they can rest assured that opportunities will not be lost if they take a break from the markets or need a few hours of shut-eye.