No build up here, unlike traditional equity markets you really can trade the forex markets 24 hours a day. Out here on the West Coast I can trade currency pairs for hours in the morning before the NYSE opens and then trade in the evening after work far after all the stock exchanges have closed. Hell, if I can’t sleep I can get up and trade at 1:00 AM if I wanted to.

However, just because the market is open 24 hours a day doesn’t mean the same opportunity to make money exists during each hour of the day! Most of the trading and price volatility occurs during specific times of the day and these are the times that most of the profits are generated. These periods, referred to as ‘sessions,’ coincide with the trading hours of Tokyo, London and New York.

For example, if I wanted to trade the Euro vs the US Dollar (EUR/USD) most of the price action usually takes place during the London session and the London/New York session overlap. The London session starts at 12:00 AM PST, New York starts at 5:00 AM PST and the overlap ends at 9:00 AM PST.

The above chart illustrates the volatility of the London and London/New York session overlap. The chart measures the average pip range (high minus the low) for each period and as you can see the range is far greater during the before mentioned sessions. If I wanted to make money via short term trading (< 1 day) I would need to be up all night watching this pair, forgoing all sleep. That is not feasible and fortunately for me I have absolutely no desire to attempt to be day trader.

However I still need to be aware that the most active trading in this currency pair occurs while I’m asleep. As such, to manage my risk, I need the proper stops or take profit orders to be in place before I go to bed (especially before any influential overnight announcements). I also I need to be up and in front of my screen by 5 AM PST daily so I can participate in the first couple of hours of the New York session before I go off to work. This is vital because numerous high impact economic announcements are scheduled during the early part the New York trading day.

Please note that EUR/USD is just one trading pair out of many. Although trading this pair in the evening PST may not be very profitable, the story is most likely the opposite for Asian currencies. The Tokyo session starts at 11:00 GMT, which is 4:00 PM PST, right when I typically leave work. For now I’m sticking with what I’m most familiar with which is EUR/USD. If I’m successful trading this pair I think looking into some Asian markets might be a prudent next step.