Best Forex Trading Hours

Some wonder what times are best to trade on the Forex market to optimize their results in relation to the time spent. Is there such a thing as the best trading hours? At a traditional stock exchange such as Warsaw Stock Exchangewhere the trade lasts from 9 am to 17 pm such a question seems to be pointless. However, Forex is a specific market that operates 120 hours a week, not just 40 hours, so this dilemma has its justification. So when is it 'best' to be 'best'?

Choice of the instrument

Forex these are primarily currency pairs, but not only. FX platforms also provide a range of other instruments such as precious metals and foreign exchange contracts (CFD), thanks to which we can also trade on agricultural commodities, stock indexes, joint-stock companies or energy carriers. It's easier with CFD instruments. Trading hours are usually limited to the working time of the exchange from which they come and thus immediately determine when to play on them. However, it is not so easy with currencies. Not only that, the whole world trades on currencies, and this ultimately affects the characteristics of individual instruments.

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Therefore, at the beginning, we should define ourselves exactly what pairs we plan to invest in. The next step is to examine the characteristics of a given market and to distinguish the periods of the day in which it behaves in one way or another.

I will use an example:

For EUR / GBP - it consists of two currencies that are at the forefront in terms of interest among investors in the world. After all, traders from Europe mainly trade on it. Therefore, the increased trading volume and volatility always start around 8-9 a.m. Polish time, and then fade away around 18 p.m., when the London Stock Exchange finishes its work. Turnover is moderate until 22:00, after which volatility diminishes even more until the morning hours. On a closer look, volatility is highest usually around 9-11 o'clock (start of the European session), then it returns in the afternoon around 14-16, when macro data are released and trade starts overseas.

Macroeconomic calendar

Therefore, pay special attention to such things as:

• hours of macro data publication for a given country,
• hours of the stock exchange session for a given country,
• the time of low liquidity for a given instrument.

During trading sessions of the world's leading countries and periods of high liquidity, we can expect low spreads and greater volatility, which is additionally affected by macroeconomic data releases. There are also factors that are more difficult to specify, so it is recommended to observe the behavior of a given currency pair on a low time interval for a certain period, so that we will be able to "feel" the selected market.

Choice of strategy

By creating such characteristics of the instrument on which we plan to play, it will be easier for us to determine when it is best (at least theoretically and based on observation of historical quotes) to observe the market depending on what strategy idea we have. It cannot be said that when volatility and liquidity is greatest, it is best to play. There are strategies that use periods of stagnation (e.g. EA Stomper playing only at night on EUR / GBP).

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So you have a choice:

• examine the characteristics of the instrument and choose the best time to trade in which your strategy will work,
• or try to find an instrument that will have interesting characteristics and create a strategy for it.

Continuous control

The markets have that they are constantly evolving, i.e. changing their characteristics. I used to be a couple EUR / CHF she was like any other. It consisted of major world currencies and was characterized by volatility and characteristics similar to USD / CHF. Everything changed when the SNB (Swiss Central Bank) began to intervene and artificially keep the rate on this instrument above 1.20. Initially, the volatility increased drastically, then fell to 20-30 pips. This example shows that you need to constantly monitor the situation on the instruments on which you plan to invest. Traders, depending on the situation in the world, transfer their capital from one market to another. Thus, they affect their characteristics.

It may turn out that week by week suddenly the average daily volatility will be halved due to the outflow of capital, and thus the morning hours, which until now were the best for trade, will not be so and we will observe changes in the afternoon exchange rate when publishing data macro, which always increases the chances of an increase in the amplitude of fluctuations.