The forex market is active 24 hours a day for 5 days a week. This means that any currency pair is available to be traded throughout the weekdays except on weekends. However, trading at some particular hours can be more advantageous to the traders than other hours.
The volatility in the forex market is different during different hours of the day for each currency pair. If you are seeking the best time to trade forex in Nigeria and Africa, this article can be quite helpful.
Forex Trading Session in Nigerian Time
The global forex market can be divided into four major trading sessions. Each trading session is centered at different locations with different time zones. The four major trading hubs are namely London, New York, Tokyo, and Sydney.
The activity and volatility of the forex market are different for each trading session.
Following are the four forex trading sessions from hubs globally along with their active hours. We have used the West African time zone to make it convenient for Nigerian traders.
- Tokyo Session – 12 PM to 9 AM
- Sydney Session – 11 PM to 8 AM (Winters), 10 PM to 7 AM (Summers)
- London Session – 8 AM to 5 PM (Summers), 9 AM to 6 PM (Winters)
- New York Session – 1 PM to 10 PM (Summers), 2 PM to 11 PM (Winters)
The currency pairs involving local currencies in trading hubs are most liquid during active hours. Currency pairs involving JPY will be fairly volatile and liquid during the active Tokyo session.
Similarly, currency pairs involving EUR and USD will be most active during active hours of London and New York Sessions respectively.
Can You Trade Forex Anytime You Want?
Apart from the active trading hours, there is a significant drop in the trading volume in the respective hubs. During the inactive hours, the concerned currency pairs have lower liquidity as the number of participants is low. This increases the difference between the bid and ask prices as the spread increases dramatically.
Trading in the inactive hours can be done but it is not recommended as prices will either remain stable or show significant movements. There is very little chance of booking profits in the hours of low liquidity due to high spreads. Technical or fundamental analysis does not work best during this time. The price movements are generally random and instantaneous. Hence, it becomes nearly impossible to predict the price movement and execute analytical trade orders.
What is the Best Time to Trade Forex in Nigeria
The best time to trade forex depends on the location where you are trading from and the currency pair you are dealing with. The time period when 2 different forex trading hubs are active is considered the best time to trade forex pairs involving local currencies.
In Nigeria, according to the West African Time Zone, the active forex market hours correspond to the London session. The best time to trade European and African currency pairs in Nigeria is 8 AM to 5 PM WAT. African as well as European markets are active during this slot and it can be the best time to trade currency pairs involving EUR, ZAR, GBP, etc.
The New York trading session becomes active from 1 PM till 10 PM WAT. Hence, this can be an ideal time to trade currency pairs involving USD, CAD, etc. The best time to trade forex is when 2 different trading sessions are active simultaneously.
1 PM to 5 PM WAT in summers and 2 PM to 6 PM WAT in winters is considered the best time to trade the majority of forex pairs in Nigeria. Most African nations including Nigeria have active working hours in this period. During this particular time period, the London, as well as New York trading sessions, are active. The spreads at these times are lowest for all the pairs involving European, American, and African currencies. However, this may not be the best time to trade Asian and Australian currency pairs like NZD/JPY in Nigeria.
There are a total of 3-time slots when more than 1 global forex trading hubs are active. Tokyo and Sydney active trading sessions remain open for nearly 8 hours. Although, there are fewer trading volumes for currencies actively traded during this time slot.
London trading session is responsible for nearly 43% of the forex trading volumes. USD is involved in nearly 90% of global forex trades. This makes the intersection of London and New York trading sessions the busiest. Both these trading sessions remain active simultaneously for 4 hours every day throughout the year. 1 PM to 5 PM WAT in summers and 2 PM to 6 PM WAT in winters is the forex trading session with the highest liquidity when the spreads are lowest.
Impact of News on Trading Activity
The slow and high-volume trading hours are separated depending on the availability and activity of traders in time zones. This makes it feasible for traders residing in different time zones to make their trading schedules. In general, the market is volatile during active trading hours and stable with a high spread during slow trading hours. However, some events can trigger price movements at any time during the day.
The impact of news can trigger price movements at any time of the day regardless of liquidity in the market.
The impact of national, international, or geopolitical news is much severe if the news is not expected or against the anticipation. This can show dramatic price movement at any time of the day during weekdays. The impact of news released during the weekend is visible on Monday when the forex market gets active.
Major events affecting the forex market also include trade deals, unemployment rates, GDP data release, accidents, attacks, etc. Any event that enhances or deteriorates the relation between two nations with different can also affect the prices of concerned currency pairs.
The global forex market is divided into trading hubs that have different trading sessions. 1 PM to 5 PM WAT in summers and 2 PM to 6 PM WAT in winters can be considered as the best 4 hours to trade forex in Nigeria.
The American, European, as well as African markets, are active during this time. The spreads are lowest and technical analysis can work best during this period. This however may not be the best time to trade currency pairs not involving American, European, or African currencies.
The best time to trade forex pairs depends on the currency pair and the location of the trader. With slight experience in forex trading, traders can themselves understand the best time to trade. New traders are always advised to gain some experience using virtual currency with a demo account. This will not only enlighten them with the best time to trade forex but will also provide the experience of price movement in the market.