What are the best pairs to trade during each session
The New York forex session is one of the most liquid forex trading sessions. When the US session overlaps with the London forex market session it is considered to be the most liquid period of the day.
What time does the New York Forex Session Open?
The New York forex session opens at 8:00 AM ET and closes at 5:00 PM ET. The ‘overlap’ occurs when the US Forex session overlaps with the London forex market session. The London Forex market session opens at 3:00 AM ET and closes at 12:00 PM ET, so the overlap occurs between 8:00 AM ET and 12:00 PM ET.
During this overlap, the US session could trade very much like the London session.
The beginning of the New York session is normally more volatile than later in the day. There are different methods traders can use to trade differing levels of volatility.
New York Breakout Strategy: Trading the ‘Overlap’
The ‘overlap’ is when the London and US forex sessions literally overlap each other. These are the two largest market centers in the world, and during this four-hour period – large and fast moves can be seen during the overlap as a large amount of liquidity enters the market.
The image below shows how during the overlap (between the green lines) of the two biggest markets, average hourly moves in the EUR/USD reach highs.
To trade the overlap, traders can use a break-out strategy which takes advantage of the increased volatility seen during the overlap.
An example of the New York breakout strategy, using the EUR/USD, is shown below:
The EUR/USD formed a triangle-pattern which, during the overlap, the price of the EUR/USD broke out of. Once a trader has properly addressed risk management, the entry into the trade can be staged with any relevant mechanism of support and/or resistance.
Trading the later part of the New York session
As London closes for the day, volatility will have a tendency to decrease drastically. From the same chart we looked at above, that showed the average hourly moves by hour of day in EUR/USD, we can see a markedly different tone in the average hourly move for the later portion of the US forex trading session:
As you can see, the later part of the New York session displays less volatility. Since the average hourly moves are smaller in the later stages of the New York session traders could use a different trading strategy, like a range trading strategy.
Using a range trading strategy trader take advantage of support and resistance levels. The chart below shows an example of a range trading strategy. When the price moves the upper bound (red line) traders will look to short the currency pair. When the price moves the lower bound (the green line) traders will look to buy the currency pair.
The logic behind using a range trading strategy is that as the volatility lowers, the levels of support and resistance may be harder to break and will therefore more likely hold- benefiting the range bound trading strategy.
Best FX pairs to trade during the New York session
The best forex pairs to trade during the New York session would be your majors, like EUR/USD, USD/JPY, GBP/USD, EUR/JPY, GBP/JPY, and USD/CHF. These pairs will be the most liquid during the US session, especially the EUR/USD during the overlap.
Each forex trading session has unique characteristics, the London forex trading session follows the New York session which is then followed by the Asia trading session.
The liquidity will lead to reduced spreads and therefore, lower trading costs. During the overlap, the combination of increased volatility and increased liquidity will be beneficial to most forex traders.
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Best Currency Pairs to Trade at What Time or Session?
So you have everything ready, your terminal is up, you open a few charts and start looking for opportunities. What crucial questions should cross your mind at this point?
Slava Loza Forex Trader & Analyst
- Which pair to trade and when?
- Are there better times to look for opportunities for certain pairs?
- What are the key factors that make an impact on currency pairs?
To answer all these, we need to see how currencies behave and if this behavior is in-line with your trading style. We are on a quest to find the best time to trade Forex pairs.
Trading sessions and currency pairs, are they related?
Forex currencies trading volume is definitely in direct correlation with people’s activity during the day.
EUR/USD currency pair trade volume and major trends appearing as New York and London session close in:
Indicator used on the screenshot: TradingSessions.
Let us take the most traded pair, for example, the EUR/USD. It is logical to see decreasing activity during the night session in EU/US as financial institutions and traders close up their trading session. On the contrary, once they open in the morning, volatility spikes.
Best Currency Pairs to Trade at What Time?
Essentially, opportunities lie where there is a big movement, breaking news, reports, or a major trend getting strength. All these drivers emerge during specific country/currency daytime.
The New York session starts at 12:00 and ends at 21:00 UTC. Therefore, the best pair to trade during the NY session is any currency pair with the USD.
The same goes for EUR, GBP, and CHF. These are the best currencies to trade during the London session.
If you are a night owl, or you are just too busy to trade during the New York session time, you may seek the best currency to trade at night. This may be the time when Sydney (AUD, NZD) and Tokyo (JPY) sessions come up, depending on where on the globe you live.
So if you are looking to catch the price movement here is the table for the best time to trade specific pairs:
SessionTime to tradePairs that containsExamplesAsian + Pacific21:00 – 8:00 UTCJPY, AUD, NZDUSDJPY, AUDJPY, NZDUSD, EURAUD…London7:00 – 16:00 UTCGBP, EUR, CHFGBPUSD, EURCHF, USDCHF, GBPJPY…New York12:00 – 21:00 UTCUSD, CAD, XAUEURUSD, USDCAD, XAUUSD, EURCAD…
When we speak about volatility (or volume) as your main indicator for market activity, it is important to note that volatility is also cyclical. Sometimes markets are ranging for days and you cannot make any profits in markets that are just flat. It may happen for a certain Forex pair or it may be for the whole Forex market globally! Therefore, if you are a trend trader, you are seeking for trends. For trends, you need trading volume to sustain it.
Ranging markets, are they good for you?
Take a look at this example, during the summer of 2014 the volatility index went down so much that every trend trader ended up with short trend profits at best. Today we are close to that low volatility level:
A good trend trader will trade when conditions are right. They avoid ranging markets with the help of indicators that show volume or volatility such as Volume Indicator, Spread Warner, Average True Range (ATR) and others.
Now, one might actually think that ranging market is great! Why? Well, there are different kind of traders, strategies, indicators or robots that are set to work optimally in such market conditions when the volume is low.
Meet the scalpers. Best time to trade for scalper traders is on short timeframes like M1 or M5 in order to capture currency pair movements that form within mere seconds to few minutes maximum. They have many trades in a day.
High volatility is not good for them, here is why: as currency pairs move up and down much more during their respective trading sessions, their trading setup cannot get a valid signal. There is too much noise for their strategies on M1 and M5 timeframes and their set stop loss level gets triggered too often.
Scalpers trade between trading sessions and the best time for them generally is when all Forex currency pairs show low volatility, such as during the summer of 2014.
Trading psychology. Are you ready now?
It is best to avoid trading currencies, equities or anything if you do not have the right mindset. Once emotions start messing with your decisions, it will show on your account balance. Every trader will feel the toll of Forex, your mood will swing in the same way as your profits and losses. Determination and confidence will be put to test as never before.
Here is what you can do. Train yourself to stick to the plan, once the decision is made do not change it. Let that stop loss you have set according to your strategy be triggered if it has to. Train your discipline, if you have found the best currency pairs to trade with your plan, then always be ready to apply that plan. This strategy that you made is your Forex bible that will help you clear emotional swings.
Now, every good trader must have a plan. Once you have determined what type of trader you want to be, the next big thing to do is to make a trading strategy. Which indicators to use? Are they in line with my idea? At what time they work best? Which currency pair? How big will my trades be? Do I always have a clear place to set my stop loss/take profit level?
Once you have all the answers it is time to put them to test. Here is where your determination needs to shine. As you test your strategy on demo accounts you will know if you are on the right track. The more you test the more you improve and the more confident you become.
This is how you become a resilient trader that will not only survive the market but use it to gain profits in the long term. And there is no better time to trade Forex than when you have all the pieces in place.
Slava Loza Forex Trader & Analyst