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Forex markets trade round the clock which means there are many opportunities for traders to find profits regardless of whether they live in London or Singapore.

It is important to remember though that the markets will trade differently depending on the time of the day.

Guest post by  FXTM

The Asian session

New Zealand is the first developed market to see in the new day, closely followed by Australia, Japan and China. The Asian session is thus the first period open for trading and generally runs between 11pm and 8am GMT (depending on UK daylight saving hours).

As the first trading session to open after the weekend it is not unusual to see some reaction to news events in those first couple of hours of trade and that can sometimes set the tone for markets all the way up until the European session. News flow out of Asia and the fluctuations of Japanese and Chinese equities will be the main market movers during this period.

However, markets are typically more quiet during the Asian session and most traders will focus mostly on AUD, NZD and JPY currency pairs. After the Asian session ends, the volatility for AUD and NZD currency pairs often drops sharply.

European session

Just as the Asian session starts winding down, the European session opens meaning there is some overlap between the two markets. This is one of two overlaps that forex markets go through and trading activity increases significantly during each.

The London open is typically a very busy period and can see big moves in currencies, particularly GBP and EUR. There is also significant news flow out of Europe early in the morning and the first hour or two of trading can be very important for the rest of the trading day. The European session typically extends from 7am to 4pm GMT.

US session

When US markets open at 2.30pm GMT (dependent on daylight saving hours), forex markets usually see their most volatile period. Since the US is the world’s biggest superpower by quite a margin, most of the world’s markets follow the US’s lead. During the overlap period of 1.30pm and 3.30pm GMT, many news events and economic releases are announced and this is typically the busiest time for markets. All of the major currencies trade heavily during this time, as does CAD.

Strategy

Deciding on the right time to trade depends on your trading strategy. Many technical traders and scalpers prefer the quiet Asian markets since they are less susceptible to disruption from news flow. News traders on the other hand and those traders that thrive on volatility obviously prefer the busier US and European sessions, particularly the overlapping periods.

Since, as traders, we pay commissions every time we trade, it normally makes sense to play the busier periods as that gives the most opportunity to make money. But each trader will have their own preference.