Course 305 – Best Times of Day to Trade Forex
In forex trading, liquidity is highest when there are more people participating in the markets.
It’s only rational to think that this happens during the overlap between two sessions. Well that’s not totally correct.
Let’s learn about some of the characteristics of the two overlap sessions to see why it’s so.
TOKYO – LONDON OVERLAP
Liquidity during this session is slow for some reasons. At this time, movement is minimal on the Asian side of the session, because this is about afternoon time when traders go for lunch breaks.
Their European counterparts on the other hand are just trickling into offices at this time, this means trading becomes slow and boring as liquidity thins out.
This would be an ideal time to take a break, or look for potential trades to engage for the London and New York sessions.
It gets super duper active at this time of the day. It is the busiest time of the day; traders from the two largest financial centers (London and New York) are working at this time.
It is also during these sessions that there are strong moves, especially because economic reports from the U.S. and Canada are released about this time too.
The markets are also sometimes shaken by “late” news release from of Europe at this time too.
Trends established earlier during the European session, might just go on, as U.S. traders would normally start out by choosing their positions and strategies based on information from happenings in the earlier sessions.
You should however be careful because towards the end of this session, some European traders may be closing their positions, and this could lead to some significant changes just before lunchtime in the U.S.