While discussing forex trading, people tend to concentrate on forex brokers and various trading strategies to ensure profits at the end of each trade. But in reality, there is one more factor that heavily impacts the outcome of all forex trades being executed in the market. Optimum forex trading hours play a crucial role in deciding the success rate of most trading sessions throughout the day. Since a global financial market like forex is open for 24/5, newcomers must consider how trading at certain hours can be more rewarding. In this article, we shall find out the best time for forex trading in India.
What is liquidity?
The forex market has become widely popular in the past few years due to an abundance of opportunities. Its sheer size and liquidity are enough to attract millions of new investors from different parts of the world. Let us talk about forex market liquidity which means its volume and number of transactions. When experts say that forex is a highly liquid financial market, it means that market participants involved with forex can buy/sell a significant volume of assets whenever they want without affecting the value or the price movements.
Why is it important?
Market liquidity is an important factor to consider when trying to decide the best time for forex trading in India. As mentioned earlier, liquidity of the forex market is high which means buying and selling of cross-pairs happens without delay and at a bargain (based on the broker chosen). The only exception is during a holiday season like Independence Day, Christmas, and New Year’s week. At that time of the year, forex market volume is at its lowest value and that means reduced liquidity. So based on market liquidity at any given time, traders decide to trade, buy, or sell.
Effects of Low Market Liquidity vs. High Market Liquidity
To choose the most rewarding time to trade foreign currencies, checking market liquidity takes precedence. Following is a comparison depicting how forex reacts when market liquidity is high vs. low.
During high market liquidity:
- Buy/sell orders are placed quickly
- The price of the assets are in the trader’s favour
- Experienced traders choose to trade during this time
- Major currency pairs are fiat cross-pairs that experience high liquidity like EUR/USD and GBP/USD etc. When market liquidity is high people turn to major currency pairs.
- Profit from market movements is possible.
During low market liquidity:
- Buy/sell orders are often delayed
- The price of the assets are never in the trader’s favour
- Experienced traders tend to refrain from trading during this time
- Major currencies are not available for trading when the forex market is experiencing low liquidity.
- Profit through market movements is negligible.
Best time to trade forex in India
Forex markets are volatile but not every minute of the day. There are certain highs and lows experienced by the market and caught only by expert traders accurately. Based on the region where a certain forex trader lives, there can be a slight difference in the time when forex markets reach a high or low point. Mostly the best time for trading forex depends on the following:
- Liquidity of the market
- Major trading session timing
- Working hours of a country
- Trading strategy utilised
- Forex pairs used for trading
By this time, we have understood the importance of keeping an eye on the market liquidity during various trade sessions to get better results at the end of each trade. Understanding which sessions suit which currency pairs is significant knowledge that each forex enthusiast should possess. The best time to trade forex also depends on the trading style of an individual. Not all trade sessions are suitable for scalping and day trading. Forex markets in India are open for trading between 9 A.M to 5 P.M IST.
Different trading hours
According to experts, forex trading gives traders the freedom to pick their working hours for trading, buying, and selling. Since there is a fixed time of opening and closure of forex markets around the world, it is of little consequence where a trader is based in. “Major trading sessions” are certain time slots when trading forex is extremely rewarding for traders new and old. The opening and closing time of the world’s largest trading sessions are:
New York:
Open time: in Summer 12 P.M GMT (5:30 P.M IST), in Winter 1 P.M GMT (6:30 P.M IST)
Close time: in Summer 9 P.M GMT (2:30 A.M IST), in Winter 10 P.M GMT (3:30 A.M IST)
London
Open time: in Summer 7 A.M GMT (12:30 P.M IST), in Winter 8 A.M GMT (1:30 P.M IST)
Close time: in Summer 4 P.M GMT (21:30 P.M IST), in Winter 5 P.M GMT (12:30 A.M IST)
Sydney
Open time: In Summer: 10 P.M GMT (3:30 P.M IST) In Winter: 9 P.M GMT (2:30 A.M IST)
Close time: In Summer: 7 A.M GMT (12:30 P.M IST) In Winter: 6 A.M GMT (11:30 A.M IST)
Tokyo
Open time: 11 P.M GMT (4:30 A.M IST)
Close time: 8 A.M GMT (1:30 P.M IST)
During the aforementioned timeslots, forex markets in the respective countries are quite active. These zones are considered as the main financial hubs that are followed by several other countries including India. During this time, these hubs experience the highest levels of trading volumes. People living in different parts of the world choose to follow the closest trade session such as Asia prefers to go by Tokyo trading session.
Now let us discuss their characteristics to uncover a bit more to see how these seemingly distant trade sessions play a vital role in deciding the best time for forex trading in India.
London Session
Midway into New York Session, London major trend session begins. It is the second-most important and busiest market in the world.
Features:
- Since in its early hours London session and New York sessions crossover, it results in a spike in liquidity during that time as spreads get tighter.
- European traders follow this session to lock in profits carefully.
- The timing for this particular session changes during winter.
New York Session
US forex market is the biggest player in the field of forex which is plain to see when you consider how every single major currency pair include US national fiat as a rule.
Features:
- Liquidity is at its extreme high when the New York session is active (especially when it opens in the morning).
- During its busiest hours, this trade session overlaps the London session.
- Economic reports are published during New York session as it brings positive results.
- More than 80% of global forex activity including buying and selling FX pairs involves US dollars.
Sydney Session
Sydney is another major session for traders around the world that sees quite a large chunk of assets exchanging hands.
Features:
- Traders have to consider the opening and closing time changes during summer and winter for this session due to daylight savings.
- Depending on a trader’s timezone, this session is the first to open on a Monday (or Sunday).
- This session impacts the Tokyo trading session which opens right after the Sydney session hits closure.
Tokyo Session
One of the major trading sessions is based in Asia and located in Tokyo, Japan. Though the name mentions Tokyo it also refers to transactions made in other countries like Singapore and Hong Kong.
Features:
- Markets that are influenced during Tokyo sessions are mainly commercial companies and even central banks.
- In terms of liquidity, this trading session could be the thinnest which makes it difficult to trade profitably.
- The markets observe a considerable amount of movement only during the release of some sort of economic data.
- Since it is an Asia-based trading session, forex pairs which include Asian and Asian pacific currencies pick up on some movements during the Tokyo session.