March 10, 2021 | by sandeep
What Are the Best Months, Days & Times to Trade Forex?
By Mateo Jarrin Cuvi
Like with almost everything in life, there are both good and bad times to trade on the Forex market.
Some months, days and times are more propitious to the art of trading, while others tend to fall flat on their face and lead to plenty of discontent.
So before moving on and opening a new position, why not read up on the best months, days and times to trade and make you some money?
Of course, all of this varies based on where you call home, but it should serve as a nifty guideline to when is a good time to jump into action.
Best Months to Trade
As to be expected, when people are on holidays, the market is not at its best for trading.
At the beginning of the year, trading experiences a high with five solid months from January to May.
Once the summer kicks in in the northern hemisphere, the markets become sluggish as people head off for the beach to sip on piña coladas and restock on vitamin D. No wonder traders across the world have “Sell in May and go away” as one of their favorite mottos.
August is by far the worst month to trade. Most institutional traders are on holiday, so the market generally experiences greater and more unpredictable volatility.
Come September, the market picks up once again, only to experience a final lull towards the end of December as the southern hemisphere’s beach season takes off and most of the world celebrates Christmas and the New Year.
A good rule of thumb is to keep away from trading during the holiday season and pick it back up once the world is up and running and no longer hungover from its time off.
Best Days to Trade
Just like the price of your favorite currency pair to trade, the level of activity in the Forex market varies from day to day. Hence, there are some days that see more action than others.
The week starts off rather slow on Sunday evening and Monday morning, only to pick up steam come Tuesday.
On Mondays, most traders are trying to situate themselves following the weekend, so the level of volatility in the market is somewhat low. Traders are studying or waiting for the latest economic indicators and trying to forecast what will transpire during the week before even thinking about opening a position.
This takes a drastic turn for the better on Tuesday as activity picks up considerably, making it one of the better days to trade. Traders already have a good idea of how they want to proceed and are ready to make their first trades of the week.
Then, there is a brief lull on Wednesday as the Forex market catches its breath and ramps up on Thursday, one of the most popular, active and volatile days for traders.
The middle of the week poses a particular problem in that triple swap rates (i.e., the rollover rate or the rate charged to traders when they opt to hold a position overnight) kick in on Wednesday night to make up for the settlement of trades during the weekend when no swap rates are applied since the market is taking a break. As a result, traders with open positions on Wednesday evening will have triple the amount of swap rates added to or subtracted from their accounts.
Friday mornings may start with plenty of activity but this movement generally tapers off as the day progresses and the world readies itself for the weekend. Volumes traded tend to decrease and trends may do a 180, making it risky for you to keep your positions open.
The market then shuts down Friday afternoon at 5 pm GMT, just in time for a well-deserved afternoon tea featuring finger food shaped like bulls, bears or your favorite Japanese candlestick.
Also, you should stay away from the market on holidays, especially major ones. Most of the large companies and important traders are taking a break so it’s unlikely that there will be any volatility from which to profit.
Best Times to Trade
Considering that the most important currency markets in the world are those in London and New York, the best times to trade are when either of those two are in session.
Better yet, catch them when they are both running and you’ll see plenty of more price volatility.
So the four hours between 12 and 4 pm in London (GMT) tend to be the most active since the New York (EST) market is starting its day. This overlap accounts for roughly 70 percent of the total trades effectuated on a daily basis.
In terms of activity, this block is followed by the 8 am to 12 pm slot (GMT) when London overlaps with Tokyo.
Activity slows down as the New York market moves into the afternoon hours, showing some of the lowest price fluctuations out there and providing a lull for traders before Tokyo and Sydney once again kick off their sessions a few hours later.
All in all, given the huge difference in time zones, a good rule of thumb is to trade when at least two markets are running at the same time.
Spreads tend to be a whole lot tighter when there’s only one market in session. Whereas, when two or more are in full gear, spreads can be more than the double of those witnessed with only one market open.
Also, currencies fluctuate the most when their regional market is open. So any pairs involving the Japanese yen or Australian dollar will witness greater price movement when the Tokyo and Sydney markets are up and running.
Finally, it’s always a good time to trade when a major financial or political announcement is made or there’s important news making the rounds. Such events generally lead to oh-so-desired price volatility, directional movements and ample opportunities to trade.
Now that you’re equipped with all of this information, it’s time to place a trade on the right day and at the right time. Let’s do it!
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*Any opinions, news, research, analyses, prices or other information contained here are provided as general market commentary and do not constitute investment advice. FXPRIMUS does not accept liability for any loss or damage, including without limitation to, any loss of proﬁt, which may arise directly or indirectly from the use of or reliance on such information.