Best time to trade Forex during the week
By far, Wednesday and Thursday are the best trading days to trade the Forex market. Friday is also a good day in terms of liquidity.
The Forex market opens every Monday in New Zealand and "follows" the Sun. As time passes, trading moves from Asia to Europe and the Americas, with economic events scheduled throughout the day. Every day is the same, but some days are more important for the Forex trader than others. This is why this article explains what the best days to trade Forex are and, more importantly, the best days when the Forex market really moves.
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The Forex market is the largest of them all. Every day, trillions worth of dollars exchange hands in the world's most liquid market.
Liquidity is paramount in Forex trading. Liquidity refers to the ability to quickly sell or buy regardless of the volume of a trade.
Most currency pairs are traded in large volumes, but some currency pairs are less liquid than others. For example, the EUR/USD is the most liquid currency pair, while crosses are less liquid. Also, liquidity is positively correlated with the best time to trade Forex, as it fluctuates heavily during trading.
Because of that, the ideal time to trade Forex is when banks are open. When top banks in Europe and the US are active in the market is the best time to trade Forex because highly liquid markets allow currency pairs to be traded in large volumes.
What are the best days to trade Forex?
The Forex market tends to start slowly, but then trading conditions gradually improve. Mondays are typically slow trading days as few economic events are scheduled, but then liquidity improves as trading continues in the week.
The best days to trade Forex are Wednesday through Friday – these days, you don't want to be wrong as a Forex trader because the market will not forgive you if you are on the other side of a trade.
What is the best time to trade Forex during the day?
The Forex market is not constant, as it moves at different speeds. As such, sometimes it is best to have no position in the market, while other times it is best to trade actively.
Slow-moving Asian sessions
One of the main characteristics of Asian sessions is that Forex pairs volatility is very low. Therefore, prices barely move, except if there is some particular economic data or even coming out (e.g., Reserve Bank of Australia's interest rate decision, Bank of Japan's monetary policy decision, Chinese PMI, etc.).
In other words, if you're looking for the market to move a lot during the Asian session, the chances are it will not do so.
Liquidity picks up during London time
Everything changes when London traders come online. London is a huge financial center, and the market's volatility increases exponentially when the trading day begins.
Also, the European session is even more active when the Bank of England or the European Central Bank release their monetary policy decisions. But overall, this is the most liquid and volatile trading session, as most banks are active during European trading hours.
The best time to trade Forex is when the European and North American sessions overlap
At some point during the trading day, the North American and European sessions overlap. This is the best time to trade Forex.
Effectively, it means that North American and European banks are active during late London trading hours and early North American ones. Also, this is when most of the essential North American economic data is released, such as the Non-Farm Payrolls in the United States or the Unemployment Rate in Canada.
Best months to trade Forex
December is the worst month to trade Forex because institutional investors and most banks end the trading year and focus more on planning for the end of the year holidays than trading financial markets.
However, it does not mean that one should not trade in December. If one does trade, it means the focus is on the medium and long-term horizon, as the markets rarely make significant moves in December.
Summer trading is also special. During the summer (i.e., end of June, July, and August), the Forex market's liquidity decreases, but trending conditions are stronger than normal. Hence, fighting markets during summer trading is not an option.
Therefore, if we leave out December and summer trading, the best months to trade Forex are the ones left in the calendar year.
Best time during the year to trade Forex
Especially important are the first months of the trading year. Starting with January, traders prepare for the new year, and many take positions in the market with a time-horizon that spans far into the trading year.
Also, institutional investors willing to take a chance on a currency pair wait for the market to come to specific levels and trade accordingly, striving to find the best cost average for their trades.
Therefore, positioning at the start of the trading year is key for the rest of the year. And then, the market's volatility increases significantly in the upcoming months, with February, March, April, and May extremely active.
During these months, the trading activity is at its highest levels in the middays of the week (i.e., Wednesday, Thursday) and at its lowest at the start of any trading week. Also, most US bank holidays are scheduled on Mondays, which is another incentive to take extra care when trading the FX market on a Monday. Furthermore, when important economic events are scheduled later in the trading week, such as an inflation report or the Semi-Annual Monetary Policy Report in the United States, the market participants prefer to wait before taking a position in the market.
Worst time to trade Forex
The biggest enemy to a Forex trader is an illiquid market. Despite being known as a market that moves a lot, the Forex market sometimes moves sideways.
In fact, consolidations are the norm, and when they form on larger time frames, the market simply does not move. This poses a challenge to a Forex trader because it leads to overtrading.
Forex traders fail at basic risk management rules, such as avoiding overtrading. If the market is not moving, there is no reason to have a position in the market, as overtrading leads to losses.
As mentioned earlier in the article, December is a difficult market to trade because of poor liquidity given by the end of the year holidays. As such, market moves are chaotic, without logic, quickly retraced, and full, so the trading environment is full of false breakouts.
During the trading week, Monday typically has similar conditions, except when an over-the-weekend event creates a gap at the opening.
As for the worst time to trade in any given trading day, it is the overlapping between the Asian and the European sessions. Because Asian traders take profits or cut losses at the end of the Asian session and the start of the European one, market moves are chaotic, and often spikes in volatility are present.
Best time to trade Forex - Traders Union Research
Research by Traders Union confirms that the best time to trade Forex during the trading week is on Wednesday and Thursday. The respondents overwhelmingly said that Wednesday is the most profitable day of the trading week (35% of the votes), followed by Thursday with 19%.
The same is confirmed by the highest number of profitable trades, which occurs on Wednesday and Thursday according to the same research.
Based on answers given by 2080 respondents, the survey has some interesting findings. First, Wednesday turns out to be the best day of the week to trade Forex.
However, the result differs if one breaks down the trading strategies into short-term and long-term ones. As such, Wednesday and Monday are the best days for long-term strategies, while Wednesday and Thursday are the best days for short-term ones.
Second, the best time of the day to trade Forex is between 06:00-12:00 GMT and 18:00-00:00 GMT.
Best Forex trading time by countries
The Forex market moves 24/5 and does not stop except for the weekend. Therefore, it becomes quite a challenge to trade the market if the trader is based in a time zone different than the time when the market moves the most.
For instance, the best trade time occurs when the London and the North American sessions overlap. More specifically, during the first part of the North American session, starting at 08:00 am New York time, trading overlaps with the last trading hours in London.
It is said that over 70% of the trades take place during this timeframe. Therefore, a trader based in the UK and in the US would like to pay attention to this trading window and will have no problem being active during these hours.
However, a trader based in Australia or Japan might find it challenging due to the different time zones.
Speaking of Australia trading hours, Forex trading takes place in Sydney from 02:00 GMT, and thus, it is a challenge for European traders, for example, to be active during this session. Yet, by using pending orders, one might find the perfect entry in a less volatile market than during European and North American trading hours.
In India, it is a bit easier to be active during the European session, as the India Standard Time (IST) is ahead of the GMT by five hours and a half. Therefore, Indian traders are most active during the European session but might find it difficult to actively trade during the North American session, especially in its second half.
Nigerian traders are also most active during the European session, as Nigerian trading hours overlap with the London ones. Trading is done mostly between 09:00 am, and 06:00 am local time.
South Africa is two hours ahead of the GMT time. Thus, traders from this country have an easier time being active during the most liquid trading sessions (European and North American ones).
Finally, traders in the Philippines have a hard time being active during the European and North American hours because the European session begins at 04:00 pm local time. Nevertheless, most of the important economic events are scheduled until the trading day ends in the Philippines, so the time zone is not that inconvenient.
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Summary
The Forex market is open 24/5, but some traders might struggle to be active when the market moves the most. The best time to trade Forex is when the European and North American sessions overlap, and the best days to trade Forex are Wednesday and Thursday.
FAQ
What are the best trading days in Forex?
By far, Wednesday and Thursday are the best trading days to trade the Forex market. Friday is also a good day in terms of liquidity.
Is it good to trade Forex at night?
It depends. If the trader is in a time zone that requires being active at night when main economic events are due, it might be wise to do so. The best way to do so is by using pending orders.
Is it good to trade Forex on Monday?
Yes. Monday is the perfect day for positioning for the rest of the trading week. Any trade should result from thorough planning, and the execution of a trading plan should start on Monday.
What are the best days to trade stocks?
When the market is open. But one should also consider main central banks' decisions and economic reports because those are the times when the market moves the most.
Glossary for novice traders
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1
Broker
A broker is a legal entity or individual that performs as an intermediary when making trades in the financial markets. Private investors cannot trade without a broker, since only brokers can execute trades on the exchanges.
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2
Trading
Trading involves the act of buying and selling financial assets like stocks, currencies, or commodities with the intention of profiting from market price fluctuations. Traders employ various strategies, analysis techniques, and risk management practices to make informed decisions and optimize their chances of success in the financial markets.
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Forex Trading
Forex trading, short for foreign exchange trading, is the practice of buying and selling currencies in the global foreign exchange market with the aim of profiting from fluctuations in exchange rates. Traders speculate on whether one currency will rise or fall in value relative to another currency and make trading decisions accordingly.
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Volatility
Volatility refers to the degree of variation or fluctuation in the price or value of a financial asset, such as stocks, bonds, or cryptocurrencies, over a period of time. Higher volatility indicates that an asset's price is experiencing more significant and rapid price swings, while lower volatility suggests relatively stable and gradual price movements.
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CFD
CFD is a contract between an investor/trader and seller that demonstrates that the trader will need to pay the price difference between the current value of the asset and its value at the time of contract to the seller.
Team that worked on the article
Mircea Vasiu is a Market Analyst for Traders Union who has been writing about the stock market and currency trading for a decade. Mircea leverages his knowledge of macroeconomics to transform data into trading and investment ideas.
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO).