One of the keys to success in trading is understanding when you should be trading, and when you should be on the sidelines. This one thing alone can make a huge difference in your trading results.
The best times to trade Forex will depend on your trading style, lifestyle and personality. Traders who are looking for trending moves should generally trade during high volume periods. Regression to the mean traders should trade during lower volume periods.
Let's take a look at times that are specific to Forex and how they can impact different traders. I'll also discuss how your lifestyle and personality will determine the time that you should be trading.
Trading Sessions and Trading Styles
The first thing you need to understand about the best times to trade, is the times that the markets around the world are open. Some markets have higher trading volume, and others have lower trading volume.
This is because some countries are bigger financial centers and more trading occurs there.
As you look at the graph above, the highest volume periods are during the times that trading occurs in London and New York. So if you're looking for big moves, then you should be trading during the London and New York sessions.
If you trade during the Sydney and Tokyo sessions, then you'll have a hard time making money with a strategy that needs big moves to be profitable.
However, if you're trading a regression to the mean strategy or a strategy that relies on low volatility, then the Sydney and Tokyo sessions are usually a better time to trade. Trading during London and New York will chop you to pieces.
You can access the graph above here.
Be sure to set the timezone on the graph to your local time.
How Your Lifestyle Affects When You Should Trade
Next, consider all aspects of your current lifestyle.
A lot of the advice that you find online will tell you to trade during the London and New York sessions.
…and that's generally good advice.
But what if it isn't possible for you to trade during those times?
What if you're usually sleeping or doing other important activities during these times?
For example, I live in the Pacific Timezone in the US. That's probably the worst timezone to trade Forex.
But I make it work.
Basically, I could stay up late to catch the London open and a little of New York, or get up really early and trade the entire New York session. But I can't trade both sessions in their entirety.
Since I'm more of a night owl, I've opted to stay up late.
Other traders who live in places like Australia, don't have to choose. Both the London and New York sessions fall within their daylight hours.
So find out when your ideal market conditions occur in your timezone.
You might only be able to trade specific timeframes like the London open or the New York close. To learn more about trading strategies that work with specific market times, consider these courses.
On top of that, ask how your current obligations might interfere with your ability to trade.
Do you have to work during a certain period of time? Working and trading at the same time makes you ineffective at both. That's not fair to you, or your employer, so focus on one at a time.
Do you have to pick up your kids? It's really difficult to trade on your phone, no matter how much you think it's possible.
So have have to make a decision to make. Either move to a more favorable timezone, change your lifestyle, or work with what you've got.
If your trading strategy doesn't match your lifestyle, then it will take much longer for you to become successful.
How Your Personality Affects the Best Times to Trade
Finally, your personality plays a huge role in determining which trading strategy is right for you, and therefore when you should be trading. You can learn more about how to figure out your trading personality here.
This is the most important factor in figuring out when you should be trading.
Peak Performance Times
Are you more of a night person, or more of a morning person?
…or maybe an afternoon person?
This is an important thing to consider.
You should try to trade at a time that's within your peak performance waking hours.
Sure, this isn't always possible, but it will improve your results.
Trading when you're tired is a recipe for disaster. So even if you're awake during a certain time, that doesn't mean that it's a good time for you to trade.
I used to think that everyone was the most productive in the morning.
As it turns out, that's not true.
We all have a chronotype.
This means that different people perform best at different times of the day.
Some do their best work late at night.
Others are freshest at 6:00 am.
To learn your chronotype, take this test. You might be surprised at what you discover.
Another important question to ask is if you're better suited to swing trading or day trading.
…or maybe even position trading or scalping.
Before you answer that, take a look at what Larry Williams says about day trading versus swing trading.
I agree with what he says. It's better to start out as a position or swing trader, than trying to jump directly into day trading.
This is because day trading requires intense concentration and most people aren't able to sit down for a couple of hours straight. Either because of a lack of attention span or because of external obligations.
On top of that, for some traders, the dopamine hits that come with day trading can be addictive. It's similar to the effect that drugs can have on the brain.
However, if you're super passionate about day trading, then you should focus on that. But be aware that day trading really does go against how most of our brains are wired, and there's usually a steeper learning curve.
On the other hand, swing trading allows for more flexible scheduling, is easier to backtest and also allows for a larger margin of error. Five or ten pips doesn't matter as much in swing trading, as it does in day trading.
Trend or Countertrend
Some traders are better at spotting trending trades. Others are better with countertrends.
You may be equally good at both.
But you should also take into account what type of trade you're looking for, when choosing a time to trade.
Trending trades will usually happen during high volume periods. If you try to enter during low volume periods, there usually won't be enough momentum to generate a trend.
Countertrend trades can usually be found during lower volume times. Ideally, you should look to get into these trades just before volume starts to pick up.
That way, you can potentially get in with a reasonable stop loss and catch the momentum of a trending market.
Successful trading is not one-size-fits-all. If someone tells you that a certain time is the best time to trade, then that's usually the best time to trade for THEM.
There isn't one best time to trade.
There's only a best time to trade for YOU.
Luckily, the Forex markets are open 24 hours a day, 5 days a week.
That means you have many opportunities to develop a trading strategy and time that fits you and your lifestyle.
Figuring that out will take some experimentation and testing. This is what can make trading challenging.
But don't give up! Keep at it and use the tips in this post to help narrow down your options.
If you want more help with how to pick the right trading strategy for you, click here to download my free book.