The fact that the global foreign exchange (FX) market is open 24 hours a day does not imply that every hour is worth trading. The U.S. dollar/Japanese yen (USDJPY) transaction is suitable for day trading during particular hours due to high volatility, which can result in profits that exceed spread and commission costs.
The finest day traders don't just want "acceptable hours" to trade; they want to trade the best hours of the day—the ones that provide the most bang for their buck. To be efficient and capture the largest intraday changes, day traders should limit their emphasis to specific hours of the day.
Activity in Trading Sessions Around the Globe
Because of global time zone variances, the forex market is always open for business at some point during the week. On Sunday night (in the United States), the Asian and Australian markets open first, making trading easier. Then Europe opens. Then North America. As a result, traders, banks, and enterprises are always willing to trade at any hours.
However, not all global markets actively trade every FX pair or currency. As a result, hiring trading activity varies by forex pair and time of day.
When London is open for business, pairs such as the euro (EUR), British pound (GBP), and Swiss franc (CHF) are more heavily traded. When New York is open for business, pairs involving the US dollar (USD) and the Canadian currency (CAD) become more active.
The USD/JPY pairing is a little unusual in this sense. Because the yen and the US dollar are frequently traded currencies, this pair usually exhibits very consistent activity throughout the day, with only a few volatility peaks and troughs. Session timings are displayed using the ForexMarketHours tool, which defaults to Greenwich Mean Time. Instead, you can set your own time zone (or that of your forex broker).
Take note of the time change caused by daylight saving time. During the warmer months in the Northern Hemisphere, trade hours in New York and London move forward an hour. When daylight saving time arrives, if you're unsure when markets open and close, consult the market hours tool for confirmation.
Times to Avoid Trading the USDJPY
An hourly volatility chart displays how many pips (hundredths of a yen) the USD/JPY pair moves each hour of the day.
Price movement activity remains rather constant for most of the day, while there are noteworthy reductions in volatility. Avoid day trading during low-volatility periods since the pip movement may be insufficient to compensate for the spread and/or commissions you will pay to execute the deal.
Trading in this pair is slow between 21:00 GMT and the Tokyo open at 00:00 GMT, which is not ideal for day trading. As Tokyo closes and London opens, the pair experiences another dip in volatility between 03:00 and 05:00. This is another reason to avoid trading.
The average daily volatility varies over time, however the hours with the lowest volatility rarely change. Look at Mataf's volatility statistics to see if other times of the day have been abnormally low—or high.
Applying an average true range (ATR) indicator to a daily chart can reveal the daily pips movement of a currency pair. If the ATR is set to 15, it will display the average daily volatility for the previous 15 days.
Ideal Times to Day-Trade the USDJPY
If you are able, day trade the USD/JPY between 12:00 and 15:00 GMT. London and New York are both open for the most of this time. Even though Tokyo is closed, this three-hour period often sees the greatest price movements of the day. (Volatility can remain high for an additional hour, until 16:00, during a four-hour period.) This means higher profit potential, since spreads are normally tightest at this time.
Bottom line, trading between 12:00 and 15:00 maximizes your USD/JPY trading efficiency. During this phase, heightened volatility creates more trading opportunities, making it ideal for capital deployment.
Other occasions may result in large movements lasting weeks or months. Check Mataf's volatility statistics on a regular basis to see when the most activity occurs. Because the USD/JPY is regularly traded 24 hours a day, there may be additional occasions when you can profit.
Other Currency Pairs to Trade
If you are unable to trade during the most active periods in the USD/JPY, consider trading other pairings, such as the euro/US dollar (EUR/USD) or the British pound/US dollar (GBP/USD), which may provide greater possibilities for you.
How do you trade the USD/JPY pairing?
To trade USD/JPY or any other forex paring, you'll need access to a forex brokerage account. Some stock brokers also give you the ability to trade forex. You may need to seek out a specialized account with a broker that focuses on forex markets.
What do you expect to happen to the USD/JPY if interest rates rise?
When interest rates increase, you earn more money for the currency you save in a bank account. If one currency raises rates and another doesn't, then the rate hike increases the currency's value. If you can get more money by storing cash in dollars rather than yen, more people will want to trade yen for dollars, and the dollar's relative value will increase.
Disclaimer
Derivative investments involve significant risks that may result in the loss of your invested capital. You are advised to carefully read and study the legality of the company, products, and trading rules before deciding to invest your money. Be responsible and accountable in your trading.
RISK WARNING IN TRADING
Transactions via margin involve leverage mechanisms, have high risks, and may not be suitable for all investors. THERE IS NO GUARANTEE OF PROFIT on your investment, so be cautious of those who promise profits in trading. It's recommended not to use funds if you're not ready to incur losses. Before deciding to trade, make sure you understand the risks involved and also consider your experience.