when the Forex market is open 24 hours a day, it does not mean that every hour of those hours is worth trading. There are certain hours in the GBP/USD currency pair that make day trading more suitable, as there is enough volatility to generate profits that exceed the cost of spreads and/or commissions. To make trading effective and achieve the largest movements of the day, day traders limit their trading to certain hours of the day.
Trading Sessions and Their Impact on Volatility
Due to the differences in global time zones, there is always a market open for business somewhere during the week. This is what makes Forex trading available 24 hours a day. However, not all markets actively trade all Forex currency pairs. Therefore, different Forex currency pairs are traded at various times throughout the day.
When London (and Europe) is open for business, currency pairs that include the euro (EUR), British pound (GBP), and Swiss franc (CHF) are traded more actively.
When New York (the United States and Canada) is open for business, currency pairs that include the US dollar (USD) and Canadian dollar (CAD) are traded more actively.
If you are trading the GBP/USD currency pair, the times that are likely to be the most active for the pair, on average, are when both London and New York are open, according to the times outlined in the attached chart.
These times are in Greenwich Mean Time. To convert them to your own time zone (or the time zone of your Forex broker), use the Forex market hours tool available here: http://www.forexmarkethours.com/markethours.php.
Acceptable Times for Day Trading the GBP/USD Currency Pair
The chart of hourly volatility illustrates the number of pips the GBP/USD currency pair moves each hour of the day. The times are in Greenwich Mean Time.
There is an increase in price movement starting at 06:00 and continuing until 16:00. After that, price movement begins to gradually decline, making it less likely to see significant price movement that day traders can participate in.
Day traders should trade between 06:00 and 16:00 Greenwich Mean Time. Trading outside of these hours may not yield price movements sufficient to cover the spread and/or commissions.
Volatility changes over time. For example, the average daily volatility at the time of writing is 78 pips per day. This average daily movement can increase to 100 pips per day, meaning each hour is likely to see slightly higher pip movements.
However, the most volatile hours generally do not change. The period from 06:00 to 16:00 GMT will remain the most suitable time for day trading, regardless of whether daily volatility increases or decreases.
As a general rule, day trading should only be conducted during hours when the price moves by 15 pips or more (preferably more).
It is also important to consider news in the stock markets and the hours during which stocks, options, and futures are traded. During the opening of these exchanges, major economic data is often released that can impact the GBP/USD currency pair.
It is beneficial to look into upcoming issues and try to predict potential market movements that could be caused by favorable or unfavorable economic data released both in Great Britain and the United States.
Ideal Trading Times for the GBP/USD Currency Pair
From 06:00 to 16:00 is an acceptable time for day trading the GBP/USD currency pair. There is enough movement to extract a profit and cover the cost of spreads and commissions.
If you are able, consider day trading the GBP/USD currency pair only between 08:00 and 10:00, and/or between 12:00 and 15:00 GMT. You will see the largest movements of the day during those periods, meaning the potential for greater profits, and spreads and commissions will have less impact compared to the potential profit.
Also,
London and New York are open during these times. This means there is a significant volume coming from two major markets, so the spread is usually tighter during this time.
Useful Tools for Forex Trading
There are many tools and programs available to help you excel in forex trading. In 2018, some standout tools can help you improve your performance and productivity in various ways.
A free tool called “Forex Calendar” helps you stay updated on the key updates happening in the forex market. This includes the dates of economic news releases, along with previous and expected values.
An add-on for the MetaTrader 4 platform called “Autochartist” is one of the most advanced chart pattern recognition programs. It is also available as a web application, making it easier for you to spot trends and patterns such as shoulders and ascending triangles.
These programs work particularly well for beginner traders, as they assist in recognizing chart patterns faster and more easily through their graphical analysis.
Best Time for Day Trading the GBP/USD Currency Pair
Not everyone is a full-time day trader, and therefore not everyone can choose their trading time. If you cannot trade during the ideal times from 08:00 to 10:00, or from 12:00 to 15:00 GMT, you can day trade the GBP/USD currency pair at any other time between 06:00 and 16:00 GMT. Trading during those times enhances the ability to achieve maximum profit potential due to the volume of movements, and the spread is usually lower during those times as well.
Source: https://www.thebalancemoney.com/best-time-to-day-trade-the-gbp-usd-forex-pair-1031020
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