Best Time to Trade Forex in Kenya

• By Clinton Wanjala

• 361

• Sep 28, 2024

The forex market is the largest financial market in the world, operating nearly 24 hours a day across various time zones. This round-the-clock nature often leads new traders to overlook how these time differences impact their investments. Unlike stock markets that adhere to a standard trading schedule, forex operates based on the business hours of four major time zones, resulting in a dynamic, 24/5 trading environment.

Understanding Forex Market Time Zones

Entering a trade at any time isn’t advisable, as market conditions fluctuate dramatically throughout the day. Some currency pairs may exhibit low volatility, while others might experience significant activity. Grasping the intricacies of time differences, the overlaps between forex markets, and the distinct trading sessions is crucial—not just for developing strategies, but for optimizing profit potential.

Key Forex Trading Sessions

Forex trading sessions can be categorized into four major groups:

1. Sydney Session
2. Tokyo Session
3. London Session
4. New York Session

Among these, the Tokyo (Asian), London (European), and New York (North American) sessions are pivotal. Instead of attempting to trade across all sessions, seasoned traders often hone in on these key periods, collectively known as the “forex three-trading system,” recognized for their heightened activity.

In addition to the major sessions, there are four minor trading sessions that traders should be aware of:

1. Singapore Session
2. Hong Kong Session
3. Wellington Session
4. Frankfurt Session

These sessions operate in a cascading manner, where the closure of one session often leads to the opening of another. Notably, some forex markets overlap, such as London and Frankfurt, which share minimal time differences.

The Asian Trading Session

While New Zealand experiences the first light of day, significant trading activities begin in Tokyo, Japan, at 7 PM and continue until 4 AM. The Tokyo session commands the majority of Asian forex trading, particularly in the USD/JPY currency pair, which dominates the market. Other pairs like GBP/CHF and GBP/JPY also see considerable activity. Japan ranks as the third-largest forex trading hub globally, accounting for around 20% of all transactions during the Asian trading hours.

However, Tokyo isn't the only player in the Asian market. Singapore and Hong Kong have emerged as vital forex centers, often surpassing Tokyo in trading volume. Currently, while Japan accounts for 4.5% of the total forex volume, Singapore and Hong Kong together contribute 7.6%.

What to Expect During the Asian Trading Session

1. Central Banks and Corporations: The primary drivers during the Tokyo session are central banks and major corporations. Japan's export-driven economy, alongside China's similar economic structure, fuels extensive daily transactions.
2. Major Currency Movements: Expect substantial movements in major currency pairs like USD/JPY, AUD/USD, and NZD/USD, overshadowing non-Asian pairs such as USD/EUR or GBP/EUR.
3. Early Session Activity: Most market movements are concentrated in the early hours of the trading session.

The London Trading Session

As the Asian session winds down, the European forex market comes alive. The London session opens at 3 AM and closes at 11 AM. London, often dubbed the financial capital of the world, sets the tone for the forex market. This session overlaps with both the Asian and North American sessions, leading to increased volatility and substantial movements in various currency pairs. Notably, approximately 43% of all forex transactions occur during the London session.

What to Expect During the London Trading Session

1. Increased Liquidity and Volatility: The overlap with both Asian and North American sessions results in heightened liquidity and volatility.
2. Trend Following: New York trading often aligns with the trends established in London.
3. Lunch Break Dips: Expect a dip in volatility during lunch breaks.
4. Technical Cues: Technical traders frequently draw insights from the prevailing London trends.
5. Key Currency Pairs: Major pairs traded during this session include EUR/USD, GBP/USD, USD/JPY, and USD/CHF, which often display some of the highest spreads.

The New York Trading Session

The New York session kicks off at 8 AM, just as European traders are wrapping up their lunch breaks. This session, accounting for around 17-18% of all forex transactions, is second only to London in terms of trading volume. Besides New York, trading centers in Toronto and Chicago are also significant, leading some to refer to this session as the North American trading session. Given that the US dollar is the most traded currency—often dubbed the 'global trading currency'—most movements are closely tied to dollar-pegged currencies.

What to Expect from the New York Session

1. Volatility and Liquidity: The overlap with the European session for three hours results in increased volatility and liquidity.
2. Economic Announcements: Announcements from the Federal Reserve or the release of new economic data can significantly influence market direction.
3. Friday Doldrums: Following the closure of European markets in the afternoon, the US market typically becomes less volatile, especially on Fridays.
4. Major Currency Pairs: Although it's possible to trade any currency pair involving the dollar, focusing on major pairs like USD/EUR, USD/JPY, and GBP/USD is advisable for optimal results.

Trading Sessions at a Glance

Best Time to Trade Forex in the Kenyan Time Zone

Kenya, located in East Africa, adheres to Eastern Africa Time (EAT). Here’s how the Kenyan time aligns with global forex trading times:

For Kenyan traders, the prime trading window spans from 11 AM to 5 PM, coinciding with the overlap of the London and New York sessions. This period typically experiences the highest volatility, providing ample opportunities for profit.

While it’s possible to trade during any session, the overlapping hours present the best chances for success. The table above indicates that apart from the Tokyo session, the other three sessions are conveniently scheduled throughout the day, making it easier for traders to engage during these active periods.

Optimal Trading Times in Kenya According to Major Sessions

1. Sydney Session: 11 PM
2. Tokyo Session: 3 AM
3. London Session: 11 AM
4. New York Session: 3 PM