Just because the Forex market hours are open 24 hours, 5 days a week doesn’t mean that any time is good for Forex trading.There are really good times to trade and times to avoid. The Forex market as explained in review of ForeX gEmiNi cODde has four major trading sessions which start with the Sydney session, Tokyo, London, and then ends with New York session. The best Forex market hours are when these sessions overlap as the most trading occurs during session overlaps.
To start with, the Tokyo session is also referred to as the Asian session. Japan is the third largest Forex trading center in the world. Tokyo is the financial capital of Asia and the Yen is the third most traded currency. About 21% of all Forex trades take place during the Asian session. Other notable Asian cities were Forex trades take place are Sydney, Singapore, and Hong Kong. Commercial companies and central banks are the main participants during the Tokyo session due to the fact that Japans heavily depends on exports. This makes the liquidity very thin sometimes. You will be more likely be able to see more movement in Asia Pacific currency pairs than non-Asia Pacific pairs.
The European session starts as the Asian session in ends. London is the forex capital of the world with thousands of Forex trades every minute. About 30% of all forex trades takes place during the London session. The London session overlaps with the Asian and New York session which makes it a peek session for Forex trade. Because of the large volume of trades, the spreads are low and the volatility is high. Most trends will typically carry over into the New York session. But sometimes trends will reverse as European trades decide to lock in profits. Keep in mind that during the lunch hour, volatility tends to die down as traders are anticipating the opening of the New York session. With all the liquidity during the European session almost any pair can be traded. The tightest spreads are the major pairs which are EUR/USD, USD/JPY, GBP/USD and USD/CHF. Historically the GBP/JPY pair has the highest pip movement hence making it a target for day traders.
As the European traders comes back from lunch, the New York session starts. This session has the highest liquidity in the morning while as it is overlapped by the European session. Always take into account the U.S. news involving the economy as 85% of all Forex trades involves the U.S. Dollar. Liquidity and volatility tends to die down in the afternoon as the European session ends. And finally, the Friday afternoons tends to experience very little movement as the Forex trading week comes into an end