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The forex market works 24 hours from Sunday 8:30 AM ET to Friday 5 PM EST every week. But this is not a guarantee that all the trading hours are favorable hours for traders. Different currencies have different favorable hours to trade. For some currencies it’s is best to trade on in the pre-market and post-market hours. Pre-market hours are hours before the market opens and post-market hours are the hours before the market closes. The USD/JPY also has its favorable trading hours.
The impact of day trading sessions on volatility.
Due to different time zones, the market is always open for business during the week somewhere. The Asian and Australian markets open first on Sunday nights. Then the European market opens followed by North America. So there is always an ongoing trade somewhere in the world. You should note that different currency pairs are traded at different times of the day because currency pairs are not bound to any centralized marketplace whatsoever.
When the European market is open for business, currency pairs involving the euro (EUR), Swiss franc (CHF) and British pounds (GBP) are the most traded currency pairs. When the US and the Canadian market are open for business, currency pairs involving the US dollar and the Canadian Dollar are also the most traded.
But currencies of the US dollar and Japanese yen which lay the foundation USD/JPY currency pair are actively traded currencies and as such, the pair experience relative stability in price action throughout the day with a few peaks and troughs in volatility.
When to avoid trading USD/JPY
The USD/JPY is calm at 2100 and the Tokyo market opens at 2400. These are not ideal times to day trade. The USD/JPY currency pair commonly experiences another drop in volatility as the Tokyo market is about to close and before the London market opens between the hours of 0300 and 0500. This is another time to avoid if you want to make a profit on the USD/JPY currency pair. The pip movements during these hours are so small that they may not be enough to make for the spread and/ or commissions costs.
Perfect time for trading USD/JPY
What is the best time to trade USD/JPY? Even though there are certain hours to avoid when trading USD/JPY, there is a bright side. There are certain favorable hours as well. During these time periods, the currency pair experiences a significant movement is price action. These are the ideal hours to trade this currency pair.
Trading the USD/JPY currency pair between the forex open market hours of 1200 and 1500 GMT are favorable hours. The London market and the New York market are both opened for the major part of these hours. Even though the Tokyo market isn’t opened, these two to three hours represent the time frame with the largest price movement for the day. Ego trading within the hours of 1200 and 1500 GMT offers a much better chance of making a profit when trading on the USD/JPY. These hours offer increased volatility which in turn offers better profit making trading chances.
Knowing the ideal trading hours before trading can give you an edge over other traders. Because you know which time periods offer the higher volatility. Higher volatility translates into a better chance of making a profit.
After all that has been said but you still can’t trade during the most active hours for the USD/JPY, then look for other currency trading pairs like the EUR/USD or the GBP/USD forex pairs. USD/JPY isn’t the only best forex pair to trade during the day.