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The Best Time to Trade Forex | TU Research

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Summary

Some of the most popular questions relate to the best time of day and the best days of the week to perform transactions. Pretty much all resources from the top Google search results on the issue tell us that the period of the highest volatility in the market is the best time for trading.

Traders Union experts have decided to conduct their own research to verify whether it is true that traders close the highest number of successful orders in the periods of the highest volatility and liquidity in the market as is commonly believed.

To secure accurate results, over 2,000 successful traders have been interviewed as a part of the research. The result is that the most successful traders perform a higher number of profitable trading transactions in a moderately volatile market.

The data became a true revelation, disproving the myth that the periods of highest volatility and liquidity in the market are the most beneficial ones for performing successful transactions.

The results of the TU research findings suggest that the previously widely spread information about the best time for trading is inaccurate. Now, the results of the latest TU research open an opportunity for traders from across the world to take a different look at the strategy for successful trading.

 In this research, the traders will find answers to the
                  following questions:

In this research, the traders will find answers to the following questions:

  • What is the best time of the day to trade Forex?

  • How do volatility and liquidity depend on the time of the day?

  • What time of the day the top currency pairs have the highest liquidity?

  • What days of the week are best suitable for Forex trading?

This new research refutes a false assumption. Therefore, it provides reliable data for making more profitable trading decisions.

Glossary

  • Forex is a global financial market for the trading of currencies. The participants of Forex trading include state-owned central banks, companies, multi-nationals, commercial banks, and private traders.

  • Forex broker is a financial services company performing the function of an intermediary between the buyer and the seller of currency in the Forex market.

  • Spread is the difference between the best buy price and the best sell price in currency exchange.

  • Volatility is the difference between the best buy price and the best sell price in currency exchange.

  • Liquidity is an economic term that refers to the ability of assets to be quickly sold at a price that is as close to market price as possible and with minimum possible expenses.

  • Trading session is a period of time, during which the banks and trading platforms of one or several countries located in the same geographical zone conduct active trading in the Forex market, thereby causing rate fluctuations of the global currencies.

  • Trading session overlapping are periods of time when one trading session overlaps with another, thus largely influencing market liquidity and volatility.

The sum and substance of the assumption that exists in open sources

Having analyzed open sources, including the materials of analysts and financial experts of top global brokers (such as Forex.com, Admiral Markets, XM.com, IG.com) and information portals (such as Investopedia, Tradingpedia, DailyFX, Investing.com, and many others), dedicated to learning to trade on Forex, and also websites containing data on trading sessions and the best time for trading, TU’s Research Department has discovered a widely spread assumption that the periods of increased liquidity and volatility that fall on Thursday and Friday are believed to be the most profitable periods for trading (i.e., the best time to trade on Forex).

The sum and substance of the assumption that exists in open
              sources

Statistical data analysis

The main trading sessions of Asia (Tokyo), the Pacific Region (Sydney), Europe (London), and America (New York) have been analyzed to determine the most liquid and volatile time for trading Forex. By their volumes the trading sessions in the aforementioned financial centers account for over 65% of the global Forex market; they also account for the main global liquidity (London – 35%, New York – 20%, Tokyo – 6%, Sidney – 4%).

  • Sidney (Pacific Region). The trading runs between 22.00 GMT and 7.00 GMT. The most actively traded currency pairs in the region are NZD/USD, AUD/USD, and other currency pairs containing NZD and AUD (New Zealand and Australian dollars).

  • Tokyo (Asian Region). The trading runs between 23.00 GMT and 9.00 GMT. In this period, the most actively traded pairs are the ones with the Japanese Yen (JPY), such as USD/JPY, EUR/JPY, GBP/JPY, and others.

  • The Session in London (European session) runs between 8.00 GMT and 17.00 GMT. The most actively traded pairs in this session are EUR/USD, GBP/USD, EUR/GBP, USD/CHF, and other currency pairs within the region.

  • Session in New York (American session). The trading in this session opens at 13:00 GMT and closes at 22.00 GMT. The main currency pairs of this session are the pairs containing US dollars, like: EUR/USD, USD/JPY, GBP/USD, etc.

The most liquid time is the period trading sessions overlap in the Forex market. In other words, these are the periods when one trading session overlaps another. This greatly influences market liquidity and affects trading.

There are several overlapping trading sessions:

  • Between 23.00 GMT and 7.00 GMT there is an overlap of trading sessions in Sydney and Tokyo; the maximum volume is observed in the currencies of this region, such as: AUD/USD, AUD/JPY, AUD/NZD, USD/JPY, NZD/JPY and NZD/USD, etc.)

  • Between 8.00 GMT and 9.00 GMT there is an overlap of trading sessions in Tokyo and London, and, accordingly, this is the time of active trading for the currency pairs of Europe and Japan (EUR/JPY, GBP/JPY, etc.).

  • Trading of pairs EUR/USD and GBP/USD becomes more active during the overlapping of the sessions in London and New York (between 13.00 GMT and 17.00 GMT).

Forex global trading sessions | Hours of overlap

Picture1. Forex global trading sessions | Hours of overlap

During the periods of trading session overlapping the number of traders trading simultaneously increases considerably, thus impacting the trading volumes. An Increase of liquidity means that the probability of slippages is lower, the chances of orders being executed are higher and the spreads on the currency pairs are lower.

Experts at TU’s Research Department reviewed data about the most volatile days with increased liquidity.

The processed data showed that Tuesday and Wednesday are the most stable periods for the traders, and Thursday and Friday are the most active days from the price fluctuation and liquidity standpoints. Trading on Monday directly depends on the important economic statistics released on that day. If there is not much of it, the day is not active, and if there is a lot, then the activity and liquidity increase to a level similar to Tuesday and Wednesday.

Activity on the trading days also substantially depends on the availability of reports and statistical data released in different countries. For this reason, Thursday and Friday are the most liquid and the most volatile days of the week.

Results of the analysis by the TU Research Department*Results of the analysis by the TU Research Department*

With the goal of objective testing of the aforementioned assumptions, the team of TU experts conducted their own survey among successful practicing traders, who are members of the Traders Union community. The survey was conducted using the CAWI (Computer Assisted Web Interviewing) method. The non-sampling error of the survey with a confidence level of 0.95 is no more than 2.0%.

The research was conducted via email interviews of traders from different regions of the world using a structured questionnaire. A total of 2,080 people were interviewed, among whom 81% were men and 19% were women.

Percentage of respondents by gender

Picture 2. Percentage of respondents by gender

In terms of their trading experience, the composition of the respondents was as follows: 4% have been trading on Forex for over 10 years; 28% – more than 5 years; 38% – from 3 to 5 years; 21% – from 1 to 3 years; and 9% – less than one year.

Respondents’ trading experience

Picture 3. Respondents’ trading experience

In terms of the average monthly deposit growth for the last 6 months among successful traders, the results are as follows: three percent of respondents have shown an average monthly return of up to 15%; 17% – up to 10; 29% – up to 5%; 32% - up to 3%; and 19% - up to 1%.

The average monthly return rate of successful
                traders, %

Picture 4. The average monthly return rate of successful traders, %

In terms of trading strategies, 44% of traders use long-term trading strategies in their work on Forex, 56% prefer intraday trading systems.

Long-term or intraday trading strategies, %

Picture 5. Long-term or intraday trading strategies, %

Results of a survey on the best trading days of the week and the best time to trade.

What do you think is the most profitable day of the week for trading Forex?

Day of the week Votes %

Monday

339

16%

Tuesday

285

14%

Wednesday

730

35%

Thursday

400

19%

Friday

326

16%

Total

2080

100%

The traders named the following day as the best time to trade Forex: Monday – 339 votes, Tuesday – 285 votes, Wednesday – 730 votes, Thursday – 400 votes, Friday – 326 votes.

Days of the week with the highest number of
                profitable trades (by vote)

Picture 6. Days of the week with the highest number of profitable trades (by vote).

What period of the day do you consider the best to trade Forex?

Time Votes %

0:00-6:00 GMT

229

11%

6:00:12:00 GMT

790

38%

12:00-18:00 GMT

416

20%

18:00-0:00 GMT

645

31%

Time

2080

100%

The best time to trade Forex according to the traders: 11% - 0.00-6.00 GMT; 38% – 6.00-12.00 GMT; 20% – 12.00-18.00 GMT; and 31% – 18.00-0.00 GMT.

The best time of day to trade Forex with the highest
                number of successful trades, %

Picture 7. The best time of day to trade Forex with the highest number of successful trades, %

The TU experts also established a correspondence between the best days of the week and the best time of day to trade Forex and received the following result.

Overlapping Picture 6 and Picture 7 to determine the
                best day and the best time to trade Forex.

Picture 8. Overlapping Picture 6 and Picture 7 to determine the best day and the best time to trade Forex.

(*) Survey criteria

  • Survey audience: Forex traders of the TU community aged 18 and older.

  • The sample is representative in terms of age, gender, and Forex trading experience.

  • Sample number: 2,080 respondents.

  • Survey method: CAWI (Computer Assisted Web Interviewing).

  • Non-sampling error of the study with a confidence level of 0.95: no more than 2.2%.

  • Survey period: 23-24 March 2021.

Findings

Findings
  • 1

    The majority of the traders who participated in the TU survey, contrary to the expectations and earlier published researches of other respectable publications stated that they considered the trading hours and days of not the highest liquidity and volatility to be the most profitable for them.

  • 2

    The respondents named Wednesday the best day of the week to trade Forex, even though this day is not statistically the most active and liquid day to trade currency.

  • 3

    According to the results of the survey, the best time of the day to trade Forex are the periods between 6.00-12.00 GMT and 18.00-0.00 GMT. That is the time when the highest percentage of profitable trades has been recorded.

  • 4

    For the traders using short-term trading strategies, in addition to Wednesday, Thursday is also a good day to trade.

  • 5

    Traders using long-term strategies note that Wednesday and Monday are the most successful days for trading.

  • 6

    It is noteworthy that the results of the survey do not depend on the gender of the trader. Both men and women, regardless of their trading experience, have the same opinion that Wednesday is the best day to trade Forex.

PDF version of the TU research

For more detailed information on the best time to trade Forex, download the full version of the research conducted by our team.

Download PDF version

The best time to trade Forex | More advice | Expert’s opinion

Liquidity is an integral part of building a strategy, which is why it is vitally important to know the time of the highest liquidity in specific currency pairs.

It is also important to take notice of the volatility of the currency pair and also taking into consideration many other factors. Practice shows that some novice traders build their trading strategy relying only on the liquidity and volatility indicators, ignoring other market indicators, which lead to losses. For trading to be successful, it is important to understand what influences key market indicators, including volatility and liquidity.

It is important to consider such important factors in your trading strategy as a calendar of important statistical data releases; and the data based on the results of the meetings of the global central banks and other important economic indicators of different countries that impact the course of Forex trading. In this case, your trading strategy will be profitable regardless of the time of the day or the day of the week.


Antony Robertson

Traders Union’s analyst trader