Best and Worst Times to Trade

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Best and Worst Times to Trade

Best Times of the Day to Trade

Cool, so we have now covered all the goods on what you need to know about the three major trading sessions that take place throughout a full 24 hour trading day. Now what we are going to do is firm up our understanding of when the best times of the day are to be trading.

When it’s Not the Best Time to Trade

Now that you understand all of the individual trading sessions you might think that anytime two sessions overlap that this will offer the best liquidity and therefore the most trading opportunities. And while this is a situation is true some of the time, it is not always the case.

For example, when the Tokyo session overlaps the London session you might think that this is a time where more liquidity will be in the market. You have the Tokyo session coming into its final hour of trading while the London session is just starting its first hour of trading. In the summer the Tokyo session overlaps the London session by 2 hours and in the winter it overlaps by 1 hour.

So we have in this situation is one session winding down and another that is just waking up; we probably shouldn’t be expecting there to be a lot of crazy price action.

Trading Tip: Volumes and liquidity tend to be the lowest at the very beginning and the very end of a session.

However, if there has been some major market moving news to come out of the Asian session then there definitely could be plenty of volume and price movement as it overlaps with the London session. The job of the London and European traders is to assess the sentiment situation that took place when they were sleeping and then trade it when it makes the most sense. If there has been a major news item in the Asian session then it will make sense for the London traders to be all over the opportunity as soon as possible.

It will also be your job to identify when the sentiment is ripe for volatility or if there is no opportunity that is currently presenting itself. This is what we do as fundamental and sentiment traders.

For the most part, the afternoon portion of the Asian session is devoid of economic news releases and the morning London traders have not yet had their coffees. Yes two sessions are overlapping but unless there is a catalyst to prompt price action and volatility it can be pretty slow moving. The key is that there needs to be a significant reason for price to be moving in this time period otherwise this is a time that we would look to avoid.

The Best Times of the Day to Trade

When the London session overlaps with the New York session this is actually a great time to be trading and it’s where the potential for larger price movements exist.

The London session typically overlaps with the New York session at 8am EST or 1pm GMT until 12pm EST or 5pm GMT. The actual time that the price action starts to pick up could be an hour or so earlier, it just depends on the trading environment for the day. This is where your understanding of sentiment will serve you well.

These overlapping times are the busiest times of the entire trading day because traders from the two largest Forex centers in the world collide with their buy and sell orders. Think of it like a battle field where two opposing armies are running straight at each other with their swords raised, foaming at the mouth with rage and testosterone….maybe it’s not exactly like that but it can feel like it at times.

During this period there can be rather large moves as fundamental economic data is released from the U.S. and Canada. This new data gets mixed in with the earlier London and European economic data. This wave of fresh economic data can either confirm the previous move or send the markets in a different direction.

The U.S. session doesn’t necessarily have to follow the same price action as the London session. The environment can flip very fast if the news is great enough. But, it will always be really nice if the data support previous trends because we already have a plan to trade it. However, we are nimble retail traders so if the new data forces price the other way then we can trade that as the big boys scramble to get out of their old positions and flip the other way.

This overlap is still early enough in the day that new market moving news out of Europe and the UK can hit the news feeds causing more volatility. Central bank member speeches tend to take place in the late afternoon or evening in London and Europe so this can also add more trading interest in this overlapping session situation.

If there were any trends that were well established in the European session, there could be a continuation as U.S. traders try to capitalize on what has happened when they were sleeping. If any U.S. data supports the trend then there could be substantial moves to come that you can look to get in on and make some fairly nice pips. But your ability to do this will come to how well practiced and your understanding of sentiment.

The London Session

We have already done a comprehensive lesson on the London trading session. If you have not read that yet then get over to that lesson and do it now.

What we will reiterate here is that the entire London session, overlapping with other sessions or not, is likely the very best time to be trading the Forex market. Here are a few reasons to think about trading in the London session:

• Trends tend to kick off and follow through.
• London is the center of the Forex Universe.
• Liquidity is absolutely massive.
• Spreads are tighter making the cost of trading more affordable and efficient.
• Speculation is a main driver of price action.
• Between 60% and 70% of all spot FX transactions take place during the London session.

So, if you haven’t done some research on trading in the London session it might be worth your time regardless of what time zone you live in.

Best Days of the Week to Trade

Now that we know about what the best times of the day are for trading it makes sense that we take a look at the best days of the week to trade so that we can marry these two concepts together and help ourselves make smarter trading decisions.

Economic Data and News

The best days of the week to trade are typically the ones with the most economic news and data releases. This is because we know that key economic data sets will tend to draw in a lot of speculative trading which increases volatility and potential follow-through in price action.

Tuesday, Wednesday, and Thursday are the days where there are the most economic data sets are scheduled for release. These are the days that you will find the average pip ranges of most currency pairs to be the highest.

As traders we typically want lots of price movement to get the most out of our trading efforts. This means the mid-week trading days are great days for us to find lots of price action.

Fundamental and Sentiment Trading are Opposite of Technical Trading

If you have been kicking around in the trading space for any amount of time the last couple paragraphs may have contradicted everything you have been taught to do in trading. Let’s break this down as to why that is.

Most of the retail education about trading revolves around technical analysis. If you have been trying to learn how to trade then it is inevitable that you have come across countless technical trading systems and training courses. We are willing to bet that this may have been the first training you have come across that is purely based on trading the fundamentals and sentiment. There simply isn’t much of this type of information kicking around.

The technical analysis courses always teach you to stay away from high impact news events. Most will go as far as to tell you to get flat in front of and not trade the aftermath of a high impact risk event. This is interesting because we are telling you that trading during those times are the best times to be trading. We are literally telling you to do the opposite of what you have been taught before.

The technical analysis gurus and courses are absolutely correct to tell you to stay away news events. This is because technical systems break down during these times. Why? Simple, squiggly lines on a chart have nothing to do with why price is moving right now, it’s the news flows and sentiment created from risk events. Remember, we are trading information that creates a sentiment, not indicators or lines on a chart.

Fundamental and sentiment analysis is the exact opposite of technical analysis. So it makes complete sense that we might suggest doing certain things that happen to be the exact opposite of what you would do if you were trading a purely technical system. Hopefully that helps a light bulb go off in your head.

How Typical Weekly Price Action Works

Price action typically unfolds in the following way throughout the week:

Sunday Price Action

Typically, the Forex market open and not a whole lot goes on in the way of price action. This is true most of the time as the Forex market is in a “wait and see mode” for the next piece of high impact news to hit the market.

However, this is not always the case on Sunday’s. If there was some major geo-political event that took place over the weekend this could force the big traders to reposition their trades or hedge their portfolios immediately upon the Forex market opening for business.

Also, if trading and price action was wild on Friday before the close, the open on Sunday may have some follow through. You will need to judge the sentiment at the time.

If you look at a daily price chart of most currency pairs it will show you that Sunday’s price bar has the lowest average price range. This is because there are virtually no economic news events on Sundays. Sunday is also not an actual full 24 hour trading day. It’s only a 2 hour day in GMT or 7 hour day in EST. These reasons are why the pip range of each currency pair is much lower on Sundays.

Most traders need lots of price movement to make money so it’s probably best to stay away from Sunday trading unless there is a major reason to be trading it.

Monday Price Action

There are typically only a few economic data releases on Mondays. Most of the economic data tends to be of lower impact. There are sometimes high impact data releases on Mondays but this tends to be rare when compared to the middle and end of the week.

However, price action does pick up slightly as traders start looking to position themselves in front of the busy week ahead. Most big funds will need to start rebalancing some of their large positions slightly to make sure they are in a smart trading position before the week really starts to kick off.

Monday can be a bit of a positioning day where price doesn’t tend to trend all that much. But, if there is a real reason to be moving then it will.

The Best Days of the Week to Trade

Tuesday, Wednesday and Thursday:

These are the days where we see the most price action. This is because there are many high impact economic data sets and central bank member speeches scheduled for release. The week is now in full swing.

The big traders are now fully committing to positioning themselves with their expectations ahead of key risk events. Remember that expectations are just as important as what the actual data says after the fact.

There are all kinds of speculation taking place after high impact data has been released which also causes large price fluctuations. Depending on how traders are positioned going into a risk event, they may need to rebalance their portfolios quickly.

Central bank member speeches tend to happen in the middle of the week. Politicians are also active and reacting to political and geo-political events. These kinds of news events may be potentially market moving.

Essentially, volume and liquidity is the highest, spreads are the tightest, the most high impact data is scheduled for release, and price action tends to move more in terms of pips. Happy days!

Friday Price Action

Friday can show a fair bit of price action in the Tokyo, London, and the early U.S. session but this tends to die off substantially towards the end of the U.S. session. This is because traders from all sessions have either packed it in for the weekend or are in the process of doing so. A large amount of traders have been removed from the market.

The one exception to this Friday idea is when we see the release of Non-Farm Payrolls or an FOMC announcement. This is typically are major market moving event that can push prices hard in either direction right into the close of trading late Friday afternoon.

Worst Days of the Week to Trade

So you now know all about the best days to be trading and all the important aspects that make up a good trading day. We have already touched on some days where the potential to make really good pips is not as high as they are on other days. What we are going to now is go a little bit deeper into the worst days of the week to trade.

Low Liquidity Market Environments

There are days when the markets tend to lack sufficient liquidity for a variety of reasons that we have touched on quite a few times now. During these low liquidity days trading tends to lack directional bias.

A lack of liquidity can mean two things for the trading environment:

1. Low movement in the price action: You can typically see no movement easily on the charts and can be avoided by simply waiting for a market to start picking up again. You will also have an idea that there will be low movement when your sentiment research doesn’t reveal anything of particular interest for the market to focus on. We need something to be driving the thought process of traders in order to get the kind of price action that we need to make some nice pips.
2. Erratic price movement, whipsaws, or spikes: Erratic price movement can be caused by something like a really big buy or sell order coming into the market when there is not enough liquidity to support the large size of the trade. Big fund traders are supposed to know not to use a sledge hammer to crack a nut but it still happens. This is sometimes called a fat finger trade. There isn’t really any reliable way to predict when price might decide to get choppy but you can choose to be in the markets only during the most reliable and liquid times.

It’s true that the Forex market is absolutely massive but there are some times when it tends to lack the necessary liquidity to do business efficiently. Having adequate liquidity is extremely important so we should focus our trading efforts on the times that offer the most liquidity and speculative trading.

Bank Holidays

Major holidays like U.S, and United Kingdom bank holidays take a lot of the key players out of the market which reduces the available liquidity. There are a couple ways for you to find out when the holidays are for specific countries.

The first is to Google “Major Bank Holidays United Kingdom” and you will get a full calendar somewhere. If you want to know other counties then just replace United Kingdom for whatever country holiday calendar you are looking for.

The other way is to look at your economic calendar because they will typically point out any major holidays that could potentially take out a lot of key players. The Forex Factory calendar typically does a good job of this.

https://www.forexfactory.com/calendar.php

Jewish Holidays

This may sound a bit strange but you should keep an eye out for major Jewish holidays. We are not saying this to be cute and it is certainly not meant to imply anything remotely racist.

There is a huge amount of money that is controlled by people who happen to be Jewish. You can come to your own conclusions of why this is but if you simply observe the price action on a major Jewish holiday and you too will see that the liquidity has fallen off noticeably.

Brandon has observed this phenomenon for over 11 years now and he notes that there is a real need to trade cautiously on these holidays because they simply lack the normal volume and liquidity. This is particularly noticeable in the equities markets.

You can see a list of the major and minor Jewish holidays for the current year we are in at the link below.

hebcal.com/holidays/

Sundays

Typically, the Forex market opens and not a whole lot goes on in the way of price action. This is true most of the time as the Forex market is in a “wait and see mode” for the next piece of high impact news to hit the market.

If you look at a daily price chart of most currency pairs it will show you that Sunday’s price bar has the lowest average price range. This is because there are virtually no economic news events on Sundays. Sunday is also not an actual full 24 hour trading day. It’s only a 2 hour day in GMT or 7 hour day in EST. These reasons are why the pip range of each currency pair is much lower on Sundays.

Most traders need lots of price movement to make money so it’s probably best to stay away from Sunday trading unless there is a major reason to be trading it.

Fridays

Friday can show a fair bit of price action in the Tokyo, London, and the early U.S. session but this tends to die off substantially towards the end of the U.S. session. This is because traders from all sessions have either packed it in for the weekend or are in the process of doing so. A large amount of traders have been removed from the market.

The one exception to this Friday idea is when we see the release of Non-Farm Payrolls or an FOMC announcement. This is typically are major market moving event that can push prices hard in either direction right into the close of trading late Friday afternoon.

Best Day Trade Timing Blueprint

We have finally made it to the end of this section on when and when not to trade. What we are going to do here is give you a little blueprint of the best times for day trading and the specific sentiment and price action reasons that you may want to confine your trading to the suggested times and percentages we go into in this lesson.

Day Trading Blueprint

The following information is some really juicy stuff that has taken Brandon several years to figure out and refine down into a simple blueprint that you can follow along with in your trading. What we are going to do is let you in on what is possibly the best trading times blueprint to help get you into trades at the right time and potentially make you some sweet pips in your day trading.

Anything outside of the suggested times and currencies in this lesson should be for managing existing trades only, not entering new trades. If you have an open position and something happens in the market it is always smart to adjust your risk however is appropriate. Only entering in the suggested times in this lesson will help keep you on the right side of the institutional buying and selling.

The following are Brandon’s 80/20 rules for trading with the power of the price action and staying out of the junk trading hours.

Focus your Trading 80% of the Time

First, let’s touch on where we have found to have roughly 80% of the best trading opportunities throughout all three major trading sessions each day. It’s always a good idea to use the concepts that we have already looked at in conjunction with this new information as well.

Keep in mind that these are not hard rules, they are just what Brandon has discovered to be of the most value to his trading and we think that they are well worth the time to go over them with you now.

• Only trade between 1am to 11am Eastern Standard Time (EST), or 6am to 4pm Greenwich Mean Time (GMT). This is when 80% of the best trading opportunities will typically happen because there are the most economic data sets, central bank speeches, liquidity, price action and speculation taking place in this time.
• 5am to 7am Eastern Standard Time (EST), or 10am to 12pm Greenwich Mean Time (GMT), tend to be a time that can produce a retracement move counter to the prevailing trend of the session. This is a good time to tighten up your stops if you have a nice winning position or lock in profits at the first sign that the trend is looking suspect. This does not mean that price will always retrace during this time period but for normal market moves it is expected that traders with winning positions will want to book profits at some point. The other caveat is that if the reasons the price is trending are very strong then we may not see a retracement until much later. It’s really all about the strength of the trend. Really strong trends will tend to retrace less and last longer while normal or weak trends will tend to retrace more and sooner.
• 7am to 10am Eastern Standard Time, or 12pm to 3pm Greenwich Mean Time, is a good time where previous trends from the early European session start to pick back up. Look for trades in line with the reasons the market has been moving from the London session for a shorter term trade. The second push in a move tends to be smaller than the first push so it’s not always wise to expect the currency to push just as hard and far. But sometimes it will push just as hard and this will be where your keen understanding of sentiment will help you make the most amounts of pips as possible. You really need to understand the power behind the prevailing sentiment to time this correctly.
• After 10am EST, 3pm GMT, retracements tend to happen as London traders are starting to think about booking profits before heading home for the day. Booking profits mean that traders will sell in an uptrend or buy in a downtrend. Also, U.S. traders are starting to think about heading off to lunch. In a typical trading environment retracements will happen. However, if the reasons for the move are really strong then we may not see a retracement until much later but this is where your skill of identifying the strength of a move will serve you.
• From 1am to 11am EST or 6am to 4pm GMT is the time period that you want to trade currency pairs with the Euro, the Great British Pound, and the U.S. Dollar as long as they have a reason to be moving.
• From 1am to 11am EST or 6am to 4pm GMT is also a time where you can look to trade safe haven currencies such as the Japanese Yen and the Swiss Franc if there is some sort of reason for the market to be overly uncertain, fearful, or concerned with what is happening around the world.

Focus your Trading 20% of the Time

• Trade the Australian Dollar and Kiwi Dollar in the Asian session only on days when one or both of these countries are scheduled to deliver high impact news events. And you should obviously trade around these high impact events when the liquidity picks up.
• During the Asian session on normal trading days it is best to only trade currency pairs with the Australian Dollar, New Zealand Dollar, or the Japanese Yen. This is because this is their time zone for trading and you are going to have better success trading an active currency that has an active equity market. It wouldn’t make much sense to be trading EURGBP in the Asian session because neither of those countries stock markets are which means liquidity will be lower on this pair.
• You can also trade the Australian Dollar if there is another reason such as overly positive or negative Chinese data affecting iron ore or copper demand. China is a huge purchaser of iron ore and copper and Australia is their largest supplier of these raw materials. Any indication that China will purchase more or less commodities can have a large impact on the price of the Australian Dollar.
• Trade the U.S. Dollar on days that the FOMC data is released at 2 PM Eastern Standard Time or 7 PM Greenwich Mean Time. This only happens about 11 times per year but when they do it tends to have a long lasting impact on price action and there could be plenty of opportunities to bank some pips.

80/20 Rule

Entering trades during these times while following these rules and you will only miss roughly 20% of the “true” trading breakouts but will likely keep you out of 80% of the “false” breakouts. This also means that you will be a part of the 80% of trading breakouts that actually have the potential to work while only being a part of 20% that do not work. This is obviously not a guarantee but it is an equation that has saved Brandon countless times and he continues to follow it to this day.

If you think about it this way, you get the chance to trade with a possible 80% of the true breakouts and price pushes and only have to worry about 20% of them being false. If you combine this with having a really solid fundamental or sentiment reason to be in the trade then your chances of making pips goes up exponentially. It certainly puts you lightyears ahead of 95% of all other retail traders because you are trading with the power of the move in the right time that the move can really work out for you. This is a huge knowledge bomb so please try and understand it.

All other times will provide less predictability and will likely result in frustration and losses if you trade them enough. However, if there is a real reason for the market to be moving prices outside of the golden times described in this lesson then there may be real trading opportunities available. But the thing that we caution is that this will be rare and it’s going to be far easier to focus on the best times previously described.

Trading Tip: Always buy or go long a currency with a strong sentiment against a currency with a weak sentiment. Always look to go short on a currency with a weak sentiment against a currency with a strong sentiment.