Best Trading Hours for Forex Intraday Strategies

Every new Forex trader has probably asked this question: “What are the best trading hours for forex?”  Although Forex is a 24-hour market, not all trading sessions are equal.  If you are day trading, this is an important thing to know.

The 24-hour market of Forex can be broken down many different ways, depending on who you ask.  For the purpose of this article, I will use the 3 session breakdown of Europe, North America and Australasia.

1. The European or “London” Session

The European session is preferred by most professional Forex traders.  The reason being: the European session has more trading volume and volatility than any other single session.

This higher volume and volatility means that trend continuations happen more often, and breakouts make more significant moves on average.

On any given day, during the European session, you’ll also notice price action spends less time in consolidation, and more time in volatility cycles.  This just means price spends more time making big moves during the European session.

2. The North American, US or “New York” Session

The North American session is  second to the European session in volume and volatility.  Many traders like to trade the 4 hour window (8 – 12 EST), known as the “power hours,” in which these two sessions overlap.

The problem is that the “power hours” are a relatively small time frame of high volatility during the North American session.  The European session is coming to a close during that time.  Most of the major players and financial institutions, that move price during the European session, are already out of the market for the day.

When the European session closes, much of the volatility in the North American session leaves with it.  If you haven’t closed your positions yet, you could be frustrated by periods of low volatility or consolidation.

To add to the obstacles of trading during this session, US economic news is released during this time.  Since US dollar pairs constitute about 90% of all Forex trades that are taken, US economic news releases tend to have a much stronger effect on price than news releases from any other session.

News releases during the North American session nullify your regular technical analysis.  In fact, unless you’re a news trading pro, you should avoid open positions during these news releases. It’s great when you’re on the winning side of a really volatile news release period, but trading during a major news release without a plan is just gambling.

Top Dog Trading has some good news trading strategies, but I haven’t spent much time studying them – so I am not currently using any news trading strategies. Also, I don’t spend much time in the “New York” session anymore. I try to make my money well before it opens.

3. The Australasian, Asian or “Tokyo/Sydney” Session

The Asian session has its advantages and disadvantages.  Many traders in the US must utilize this session because of the time constraints of their full time jobs.  I started out live trading during the Australasian session, and I still trade it from time to time.

The Australasian session has the lowest volatility of any session.  This low volatility often means that your normal technical analysis will not work during this session.  Your entire trading system may not work during these low volatility hours.

That being said, you can make money during any session, with the right strategies and discipline.  I personally use a scalping strategy along with price action signals during the Australasian session from time to time.

Conclusion:  The best trading hours for Forex are during the European session, because of the opportunity to trade large moves in price.  If you cannot trade the European session, the next best option is the “power hours” of the North American session.  Lastly, I recommend not trading the Australasian session, unless you have a reliable trading method that works during periods of low market volatility and/or a good hedging strategy.

 

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