Knowing the high volume forex trading timeframes

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John Forman - The Essentials of Trading author

An extremely frequent question I see in the forex discussion boards and that I get in my conversations with new traders is what time of day is best to trade. The forex market is 24-hour in nature, so it trades all the time (in some cases on the weekends as well) so that might seem like a strange question. For someone who is a day or short-term trader, though, it matters.

There are three primary timezones for the forex market. Each trading day effectively starts in Asia with trade kicking things off first in New Zealand, then progressing through in to Australia, Japan, Hong Kong, Singapore, etc. The second major timezone is Europe with significant trading taking place in all of the major countries’ financial centers. Lastly, North America comes in as the third major timezone. Within each of those timezones, the bulk of the action is going to take place during normal hours of about 8am to 4pm local time.

The highest volume of trading activity takes place in the overlap between European and North American trading. That runs from about 7am to noon US Eastern time. It is the period with the highest quantity of trader active in the market, and also when the majority of the major data releases and press events take place. That makes it prime time for day traders as there is almost always action then.

The second peak volume period is generally going to be the overlap between Asia and Europe. That is a shorter amount of time, but still offers the potential for quite a bit of activity, especially when things have been happening in Asia leading up to that overlap.

Now of course there is trading in all of the major global currencies during the rest of the day. That said, though, you will normally find that from about 3pm to 7pm Eastern there is little in the way of price action. It will vary a bit depending on whether we’re in daylight savings or not because of how far ahead that makes Aukland and Syndey (remembering that they are in the southern hemisphere), but generally speaking, that time frame tends to be the lowest volume.

Naturally, for the swing or positions trader these time considerations do not mean all that much. For someone looking at day trading, though, know when the volume and price movement is most likely to take place can mean all the difference in the world.

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