A guide to trading sessions and making the most of your time
To make the most of trading you have to be ready not only with a decision on what instrument and direction you’ll trade. It’s also necessary to know when the best possible conditions will be on hand to make your trades. With a wide array of currencies, stocks and indices it can be a bit of a challenge to find your way and identify when the best times are.
So in this three part article we’ll be covering the active hours for all types of instruments and help you get some bearings on when there is more actionable volume. A quick note about the time we’ve selected to write the time in – we’ve picked GMT as this is the most commonly accepted time zone for multiple purposes, including trading. For a bit more information on what GMT click here.
Let’s kick it off with forex, the market that never sleeps, it often goes with the expressions “open 24 hours” in all workdays and being “the largest in the world.” Apart from several hours at the end of Friday, this is true and does dwarf the stocks markets in the world.
The trading day for currencies is determined by the beginning, end and overlaps of the three trading sessions – Asian, European and American. Some use the main financial centers to describe them (Tokyo for Asia and London for Europe), but we feel it’s accurate only for the U.S., where New York has an undisputed leadership when compared to Canadian, Mexican and South American trading sessions, so we’ll go with the former style.
The Asian session begins at 11pm GMT with New Zealand and Australian markets and adds Tokyo, Singapore and the Shanghai-Hong Kong combined exchange as time goes on. The general volume higher is lower than those in Europe and the U.S.
One thing to keep in mind when either trading in this session, or trying to analyse what happened in it, is that in four out of five of the weekdays it follows the U.S. session, so it can be influenced by what happened beforehand. This is especially valid for indices and broader groups of stocks and industries. However with the rise of Chinese economic power, more and more economic data that comes out from there, alongside the traditional ones from Japan and Australia, the more established economic powerhouses in the region. These announcements are increasing their effect on Europe and the U.S.
The Asian session ends at 8am GMT and in its last hour it overlaps with the Europeans. Markets in Frankfurt and Paris open an hour before London and you’d expect a bit of volatility, but currency markets are usually unmoved. Activity here is determined by data from the three main countries – Germany, France and England with their respective inflation, unemployment and bank rates under particular scrutiny. They influence the largest indices – the DAX 30, CAC 40 and FTSE 100.
In the last several hours of the European session we get the most important trading time, not only for currencies, but also indices, stocks and sometimes commodities. This is the overlap between Europe and the U.S. and this is still the main focus of traders around the globe. The important economic announcements for the U.S. usually come out at 1:30pm GMT and/or at, falling within the European session (intentionally so) at 3:00pm GMT, surrounding the open of the New York Stock Exchange (NYSE) at 2:30pm GMT.
Europe closes at 4:30pm GMT with markedly increased volatility as individual, professional investors alongside corporate traders close their intraday positions. This leaves the run-in to the close of trading in the U.S. at 9pm GMT.
The times that the stock markets open and close is based on local business hours. They vary during October and April during the shift to and from daylight saving. These change the exact open and close times of the markets and increase or decrease the respective time of overlaps so prepare in advance when it approaches as some trading habits might need adjusting.
Part two of our series will be online tomorrow at 4pm GMT and will cover when stocks and commodities are traded the most, as well as what days of the week are most suitable for trading currencies.