What are the best times to trade forex in south africa

The Best Time to Trade Forex in South Africa

When is the best time to Trade Forex in South Africa?

Understanding the best time to trade forex in South Africa depends on a number of factors. In this article, we’ll cover the different Forex markets sessions and explain how to decide on the best time to trade forex.

Trading the international foreign exchange markets online in South Africa is accessible Monday to Friday 24 hours per day, 5 days a week. The global Forex markets are open and available to be traded at 23:00 in South Africa on a Sunday evening and closes at 23:00 on a Friday night.

Positions can be held overnight, for days on end, depending on the preference and strategy of the trader. Many South African online traders who start their trading journey do not completely understand when the best time to trade would be, and more importantly, why… 

Before we dive deeper it is important to grasp what to look for when deciding on your trading strategy and preference.

There are 3 key factors to consider when and how to trade Forex

  • Liquidity
    • ease of which positions can be opened and closed
  • Volatility 
    • price movement creating opportunities for traders
  • Trading Volume
    • How many times a currency pair is bought or sold in a period

When Forex markets are most active trading conditions can be favorable as spreads are low and market movements increase.  This can be seen when the London session opens, as there is often big trading volume and therefore good volatility. The same can be said for the opening bell of the U.S session which brings huge liquidity to the market.

Understanding the best times to Trade Forex in South Africa

Forex Market Hours in South Africa

World MarketsTrading Hours SASTSydney, Australia24:00 – 08:00Tokyo, Japan2:00 – 04:30 / 05:30 – 08:00London, England10:00 – 19:00New York, USA15:30 – 22:00

*All times are South African Standard Time

This article focuses on the top 4 major market sessions affecting Forex trading

How to decide which markets to trade

The first aspect of trading international Forex markets is to identify which markets to trade (EUR, USD, GBP, CHF). Once you have made the decision of which session and currency pair to trade, you can determine what time the market will be actively traded within the country.

It is then important for the discerning South African trader to then take note of the time zone differences and plan trade strategies accordingly.

If you are trading with the goal of closing out your positions after a few days, weeks, or months, then these open / closing times should not affect you greatly. Traders who should take notice are scalpers and day traders. 

As traders we want volatility in the markets and, just because the markets are always active, does not mean that they are volatile.

Volatility happens when the exchange opens, and investors are affecting market movements with big orders being processed. Therefore, it is important to note when specific markets open relative to South African time.

The risk of holding a position when different market sessions overlap is big market movements that can negatively affect your open trade. 

For example, if you are trading the AUD/USD from 9:00 SAST, you may find the market moves slowly compared to others, because of the fact that neither of these countries (Australia / United Stated) exchanges are open; but when the U.S session does open, your position gets whipsawed in different directions due to liquidity entering the markets. 

This article is being written solely for the purpose of providing our local South Africans with insight and perspective.

When trading in South Africa we need to determine the markets, which will provide the most consistent volatility throughout the hours we are actively monitoring our trades. 

Therefore, trading markets such as the GBP, ZAR, and EUR would be recommended due to the small gap in the time zones, as the EUR / GBP markets open at 10:00 am.

If you are looking to trade USD pairs, for example, you would look to start your trading day around 15:30 when the U.S session opens. 

Trading in the relevant market sessions allows you to decrease your risk through anticipating volatility and holding onto your positions with a trading plan in mind to know when to start closing out. 

The best time to trade gold in South Africa

The best time to trade gold in South Africa is when the market is most active and volatile. This can be seen when the London session opens, as there is often big trading volume and therefore good volatility. The same can be said for the opening bell of the U.S session which brings huge liquidity to the market.

It is then important for the discerning South African trader to take note of the time zone differences and plan trade strategies accordingly.

If you are trading with the goal of closing out your positions after a few days, weeks, or months, then these open / closing times should not affect you greatly. Traders who should take notice are scalpers and day traders. 

As traders we want volatility in the gold markets and, just because the markets are always active, does not mean that they are volatile.

Volatility happens when the exchange opens, and investors are affecting market movements with big orders being processed. Therefore, it is important to note when specific markets open relative to South African time.

The risk of holding a a gold trade position when different market sessions overlap is big market movements that can negatively affect your open trade. 

The price of gold

When it comes to trading commodities such as gold, it’s important for traders to understand the factors that can affect its price.

Gold is a precious metal that is often used as a hedge against inflation and economic uncertainty. Its price can be affected by a variety of factors, including:

– Economic indicators: such as GDP, inflation and interest rates

– Geopolitical factors: such as trade tensions, conflict and natural disasters

– Supply and demand: including central bank reserve holdings, jewellery demand and mine production

By understanding these factors, traders can get a better sense of how they might affect the price of gold and make informed trading decisions.

As a South African trader, the best time to trade is when major market sessions overlap.

This is generally between 10:00 and 16:00. During these hours South Africans can catch the last two trading hours of the Tokyo session, which overlaps with the opening of the London session, and a few hours later this session overlaps with the opening of the U.S markets. 

The London and the U.S sessions are generally the most active trading hours as all market participants affect the currency market in some way. These sessions are prone to important economic news and data being released that potentially have a great impact on exchange rates. 

By understanding market sessions you can identify suitable forex strategies based on market activity in those sessions. Volatile market sessions and major currency pairs are ideal for applying a forex scalping strategy if your risk appetite can handle it.

 

Many first-time forex traders hit the market running. They watch various economic calendars and trade voraciously on every release of data, viewing the 24-hours-a-day, five-days-a-week foreign exchange market as a convenient way to trade all day long. Not only can this strategy deplete a trader’s reserves quickly, but it can burn out even the most persistent trader. Unlike Wall Street, which runs on regular business hours, the forex market runs on the normal business hours of four different parts of the world and their respective time zones, which means trading lasts all day and night.

So what’s the alternative to staying up all night long? If traders can gain an understanding of the market hours and set appropriate goals, they will have a much stronger chance of realizing profits within a workable schedule.

Key Takeaways

  • The forex market runs on the normal business hours of four different parts of the world and their respective time zones.
  • The U.S./London markets overlap (8 a.m. to noon EST) has the heaviest volume of trading and is best for trading opportunities.
  • The Sydney/Tokyo markets overlap (2 a.m. to 4 a.m.) is not as volatile as the U.S./London overlap, but it still offers opportunities.

The Forex Markets Hours of Operation

First, here is a brief overview of the four markets (hours in Eastern Standard Time, or EST):

New York

New York (open 8 a.m. to 5 p.m.) is the second-largest forex platform in the world, watched heavily by foreign investors because the U.S. dollar is involved in 90% of all trades, according to “Day Trading the Currency Markets” (2006) by Kathy Lien. Movements in the New York Stock Exchange (NYSE) can have an immediate and powerful effect on the dollar. When companies merge, and acquisitions are finalized, the dollar can gain or lose value instantly.

Tokyo

Tokyo, Japan (open 7 p.m. to 4 a.m.) is the first Asian trading center to open, takes in the largest bulk of Asian trading, just ahead of Hong Kong and Singapore. The currency pairs that typically have a fair amount of action are USD/JPY (or U.S. dollar vs. Japanese yen), GBP/USD (British pound vs. U.S. Dollar), and GBP/JPY (British pound vs. Japanese yen). The USD/JPY is an especially good pair to watch when the Tokyo market is the only one open, because of the heavy influence the Bank of Japan (Japan’s central bank) has over the market.

Sydney

Sydney, Australia (open 5 p.m. to 2 a.m.) is where the trading day officially begins. While it is the smallest of the mega-markets, it sees a lot of initial action when the markets reopen on Sunday afternoon because individual traders and financial institutions are trying to regroup after the long pause since Friday afternoon.

London

London, Great Britain (open 3 a.m. to noon): The United Kingdom (U.K.) dominates the currency markets worldwide, and London is its main component. London, a central trading capital of the world, accounts for roughly 43% of global trading, according to a report by BIS. The city also has a big impact on currency fluctuations because Britain’s central bank, the Bank of England, which sets interest rates and controls the monetary policy of the GBP, has its headquarters in London. Forex trends often originate in London as well, which is a great thing for technical traders to keep in mind. Technical trading involves analysis to identify opportunities using statistical trends, momentum, and price movement.

The Best Hours for Forex Trading

Currency trading is unique because of its hours of operation. The week begins at 5 p.m. EST on Sunday and runs until 5 p.m. on Friday.

Not all hours of the day are equally good for trading. The best time to trade is when the market is most active. When more than one of the four markets are open simultaneously, there will be a heightened trading atmosphere, which means there will be more significant fluctuation in currency pairs.

When only one market is open, currency pairs tend to get locked in a tight pip spread of roughly 30 pips of movement. Two markets opening at once can easily see movement north of 70 pips, particularly when big news is released.

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Image by Sabrina Jiang © Investopedia 2021

Overlaps in Forex Trading Times

The best time to trade is during overlaps in trading times between open markets. Overlaps equal higher price ranges, resulting in greater opportunities. Here is a closer look at the three overlaps that happen each day:

  • U.S./London (8 a.m. to noon): The heaviest overlap within the markets occurs in the U.S./London markets. More than 70% of all trades happen when these markets overlap because the U.S. dollar and the euro (EUR) are the two most popular currencies to trade, according to Lien. This is the most optimal time to trade since volatility (or price activity) is high.
  • Sydney/Tokyo (2 a.m. to 4 a.m.): This time period is not as volatile as the U.S./London overlap, but it still offers a chance to trade in a period of higher pip fluctuation. EUR/JPY is the ideal currency pair to aim for, as these are the two main currencies influenced.
  • London/Tokyo (3 a.m. to 4 a.m.): This overlap sees the least amount of action of the three because of the time (most U.S.-based traders won’t be awake at this time), and the one-hour overlap gives little opportunity to watch large pip changes occur.

Impact of News Releases on Forex Markets

While understanding the markets and their overlaps can aid a trader in arranging his or her trading schedule, there is one influence that should not be forgotten: the release of the news.

A big news release has the power to enhance a normally slow trading period. When a major announcement is made regarding economic data—especially when it goes against the predicted forecast—currency can lose or gain value within a matter of seconds.

Even though dozens of economic releases happen each weekday in all time zones and affect all currencies, a trader does not need to be aware of all of them. It is important to prioritize news releases between those that need to be watched versus those that should be monitored.

In general, the more economic growth a country produces, the more positive the economy is seen by international investors. Investment capital tends to flow to the countries that are believed to have good growth prospects and subsequently, good investment opportunities, which leads the country’s exchange strengthening.

Also, a country that has higher interest rates through their government bonds tend to attract investment capital as foreign investors chase high yield opportunities. However, stable economic growth and attractive yields or interest rates are inexorably intertwined.

Examples of significant news events include:

  • Interest rate decisions by central banks since higher interest rates tend to attract more global investment and capital flows, strengthening the currency
  • CPI data, which measures inflation and can impact central bank policy
  • Trade deficits or more imports versus exports, which translates to more cross-border capital flows impacting exchange rates
  • Consumer consumption–a major driver for economic growth in the U.S. and globally
  • Central bank meetings since any remarks are watched closely for indications of future interest rate moves
  • Consumer confidence, which measures how the average consumer feels about the economy and impacts consumer spending
  • GDP data or Gross Domestic Product is a measure of all goods and services produced in a country
  • Unemployment rates, which measure the unemployed workforce since lower unemployment tends to translate to better growth and a stronger currency and vice versa
  • Retail trade measures how much is being spent by consumers and drives economic growth

Why Do Forex Markets Trade Around the Clock But Not Stock Markets?

Forex markets are “open 24/7” in a sense because different exchanges around the world trade in exactly the same currency pairs. A stock exchange generally lists and trades in shares of a given country, so even when other stock markets are open internationally, they are largely trading in local securities and not the same exact stocks. While there are foreign stocks listen in the U.S. as ADRs, for example, the ADR shares will remain closed at certain hours when the actual foreign shares are open, and vice-versa.

Why Is Forex Liquidity Important?

Liquidity refers to how easy it is to quickly buy or sell securities for a fair price. If there is high liquidity the bid/ask spread will be tighter and you can trade more without moving the market. On the other hand, in an illiquid market the spread between the bid and ask may be very wide and not very deep. I general, liquid currency pairs are those that are active and have high trading volume.

Which Are the Most Liquid Currencies?

The most traded currencies in the world include the U.S. Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Australian Dollar (AUD), Canadian Dollar (CAD), and Swiss Franc (CHF). The four major pairs at present are the EUR/USD, USD/JPY, GBP/USD, and USD/CHF.

The Bottom Line

It is important to take advantage of market overlaps and keep a close eye on news releases when setting up a trading schedule. Traders looking to enhance profits should aim to trade during more volatile periods while monitoring the release of new economic data. This balance allows part-time and full-time traders to set a schedule that gives them peace of mind, knowing that opportunities are not slipping away when they take their eyes off the markets or need to get a few hours of sleep.

Written by Jane