The optimal time to trade the forex (Foreign Exchange) market or the best forex market hours is when it's at its most active levels when trading spreads (the differences between bid prices and the ask prices) tend to narrow. In these situations, less money goes towards the market makers who facilitate currency trades, leaving more money for the buying and selling investors to personally pocket.
The trading week runs 5.5 days per week, 24 hours a day. It begins in Asia Sunday afternoon Eastern Standard Time (EST), or Sunday evening Greenwich Mean Time (GMT), and progresses each day until the close of trading in the United States as follows.
Not surprisingly, then, the greatest liquidity occurs when both London and New York are operating. The table below shows the forex trading hours graphically.
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There are three major sessions each day: Asian, London/European, and the U.S. The timing of these is important because the best times to trade are when two of the sessions overlap. When they do, the increased liquidity means you get the fairest prices due to the abundance of those willing to take the other side of your trade.
The second most liquid forex market time: 1 to 3 A.M. EST combines the top Asian and European sessions. The most liquid time is 8 to 11 A.M. EST, which combines the most liquid European markets with those of the United States.
The most liquid, and thus best hours for forex trading in Kenya are when London and the U.S. sessions overlap. You usually get the most participants, and hence strongest price moves and fairest trade execution. However, don’t make the mistake of thinking that each currency trades heaviest in its local time zones. Instead, they trade most heavily in the most liquid markets, during the London and New York sessions.
In all financial markets, not just forex market, one session tends to take its cues from the one before it.
Similarly, if one session reverses the prior session’s moves, chances are good that the next session will open in that same direction.
Obviously, markets don’t continue in one direction for long stretches on a daily basis. What breaks the cycle of follow-through from one session to the next?
The two most common forces that change market direction are:
1. News or How It’s Interpreted: Major news events or reports from the economic calendar are what tend to drive these changes. For example, the United States could close very bullishly, but if during the Asian session some significant bearish news comes, like evidence of China, the biggest Asian economy, slowing down, that could cause Asia to reverse lower.
New interpretations of news events can have the same effect. For example, there are occasions when a major event occurs late Friday in the U.S. session (like U.S. monthly jobs reports or Non Farm Payroll) and markets don’t have enough time to digest them before the weekend. In such cases, the final judgment isn’t rendered until the Asian session begins the following week.
2. Technical Levels: The News Is Already Priced In Trend exhaustion from technical support and resistance can also break the cycle of follow-through from one session to the next. In other words, at some point, a rally or pullback hits enough technical support and resistance to halt the current trend unless there is new news to fuel a continuation of the move. Otherwise, all news is already “priced in,” and price either remains locked in a range or reverses as participants take profits or open short positions.
Asia tends to lag the New York trading session because Asia is closed when U.S. news comes out, so major U.S. news provides hints about how Asia will open. The European session reacts to early U.S. news but misses later news, and its open is influenced by what happened in Asia.
For example, if great news comes from the United States, but then there’s bad news in Asia, Europe’s opening will reflect how traders are responding to the combination of news from both sessions. Likewise, the U.S. opening tends to take into account the news of both Asia and Europe.
In sum, short-term moves are heavily influenced by the region that most recently finished it's forex trading day, news, and whether that news justifies moves up to or past the next technical levels. As mentioned earlier, short-term money flows from big players (either from big speculators or simply commercial traders funding normal multinational business operations) can also start short-term price moves.
If Tokyo, London, or New York are closed for a holiday and the other two were open, then you’d expect a catch-up session when markets reopen for that region. For example, if the United States shows strongly improving monthly employment reports on a Friday forex market time (during the last session of the last trading day of the week), and closes sharply higher, expect Asia to open strongly to price in that news at the start of the following week.
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