When is the best time to trade FX considering volume, volatility and liquidity factors?

Forex Trading Sessions Schedule

Trading volume, volatility and liquidity of financial instruments directly depend on the geography of trading sessions and regional macroeconomic factors. Understanding at what time the instrument has the widest range of rate fluctuations and high trading volumes, you can significantly improve the effectiveness of the chosen trading strategy.

The foreign exchange market is part of the global financial market and currency trading activity is linked to the opening hours of the major stock exchanges. The trading schedule on stock exchanges is set according to local time, which can be determined by the deviation from UTC (universal coordinated or universal time). UTC time never changes and time zones are set to times expressed as a deviation from universal time.

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1. Asia (00: 00-09: 00 UTC)

Opens the trading day and forms the main sentiment in the markets. The Asian session accounts for about 21% of all foreign exchange transactions carried out during the trading day. At the same time, the most active and voluminous trades take place in USD / JPY, EUR / JPY, as well as in the Singapore dollar and Chinese yuan. Currency transactions with JPY account for about 16.5% of the total daily turnover.

Features:

• Liquidity is quite low, trading is “thin”, investment companies and hedge funds usually use this time in order to bring the market closer to important price levels and option barriers;
• Japanese and Australian statistics are usually released at the opening, which gives a push to the pairs AUD / USD, USD / JPY and sets the range and direction of movement for the whole day. At the end of the session, the publication of the minutes of the Central Bank or speeches of financial leaders may be scheduled;
• The main volume of transactions in the USD / JPY pair is carried out by institutional investors with dollar-denominated assets (primarily the Bank of Japan). Major Japanese exporters are converting their profits from the dollar to the yen;
• The yen rate is influenced by supply / demand in the Japanese stock market (stocks, bonds);
• Most often in the morning, after the Shanghai opening, news comes from China, which gives price activity in pairs with AUD and with JPY;
• An important role is played by the morning prices for the main raw materials (oil, copper, gold, iron ore) on the Chinese stock exchanges – AUD, NZD and JPY can speculatively react to them;
• If there was increased activity on the main currency pairs at the previous American session, then the Asian session turns into a period of global consolidation.

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Overlapping Asia / Europe (07: 00-09: 00 UTC)

At 07:00 UTC, the first European players enter – Frankfurt, Moscow and Johannesburg, after which Asia and Europe trade together for another two hours. This is the most inactive market period during which traders are fixing positions after the Asian session and preparing to open trades in Europe.

2. European session (07: 00-16: 30 UTC)

The most “adequate”, from the point of view of theory, is a trading session. Volatility, being quite high, but not aggressive, calms down after 10:00 UTC, and begins to rise again speculatively before the opening of the American session.

Features:

• Price trends for EUR, GBP and CHF are formed in the first hours of the session;
• The main trading turnover occurs in EUR / USD, GBP / USD, USD / JPY, USD / CHF, EUR / JPY and GBP / JPY;
• All European banks, including the ECB, investment companies and hedge funds, operate as market participants;
• Of great importance are the published statistics on the Eurozone and Great Britain (before 10:00 UTC), the results of meetings of the Central Banks, speeches of officials;
• In the European session, large (portfolio) investors complete their daily asset restructuring, after which they convert European assets into dollar assets before the American session. This provides the market with high volatility.

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Overlapping Europe / America (13: 30-16: 30 UTC)

The most active and volatile time. During this period, more than 70% of all transactions made during the European session, and more than 80% of transactions made during the American session, take place.

Features:

• A lot of private traders are pouring into the market looking to make quick money on extreme volatility;
• The interests of big business and individual institutional players, who trade only during this period, are aggressively colliding. Central banks are actively working. Attempts are being made to break the trend that has developed during the day;
• At this time, economic data for America and Canada are published: employment (NFP), GDP, retail sales, CPI indices, stock reports of companies. News like the NFP can completely change the price dynamics for a week or a month in advance;
• The largest volumes of commodity futures are traded, adding volatility to dependent currencies.

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3. American session (13: 30-20: 00 UTC)

During the American session, the trend towards the strengthening of the US dollar often prevails. Aggressive confrontation in dollar instruments between speculators may continue until the very close of trading, especially on Friday.

Features:

• High liquidity at the beginning of the session is due to the publication of economic statistics immediately after the opening of the stock exchange in New York. US data affects almost all foreign exchange instruments, and data on oil stocks – on the price of commodity futures;
• After the opening of the American stock market and the bond market, foreign investors convert EUR, JPY, CHF, GBP into USD, in order to carry out transactions on American stock exchanges;
• During this period, US banks are actively working, ensuring the movement of capital between the foreign exchange and stock markets. This is the most favorable period for financial intrigues on the part of large players capable of influencing the accumulation of speculative volumes at key price levels;
• The American session is a large trading turnover not only for EUR / USD, GBP / USD and USD / JPY, but also for USD / CAD (Canada), BRL / USD (Brazil), USD / MXN (Mexico), as well as for futures on the dollar index, WTI oil, and S&P. All these factors together form the market dynamics;
• Due to the accumulated speculative volumes in the American session after the MHIF meeting and the press conference of the head of the FRS, the market is characterized by a change in trends and the formation of new trends in the medium term.

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