With most forex traders also having a primary job alongside their trading, many traders have had to look at trying to trade in the night. Whether it’s time commitments or just something you’re looking to try, there are many reasons why you may look into trading forex at night. With that being said, is it actually possible to trade forex at night? Let’s find out…
It is possible to trade forex at night, but not advised. Due to a lack of volume there are less trading opportunities, higher risk and larger spreads. If you are trading at night, ensure you’re using currency pairs that have volume like AUDUSD or NZDUSD.
Is It Possible To Trade Forex At Night?
The forex markets are open for 24 hours per day, meaning that wherever you are in the world, it’s possible to trade at night. The night can have its own share of opportunities, especially for those traders not looking to chase the major moves.
So… Is it actually possible to trade forex at night? Yes! Although caution must be taken as during the night markets are typically slower and choppier than the day time markets. In general, traders looking to engage in a more directional trading style are advised to stick to the day time. However, there is still opportunity throughout all times of the day.
When trading at night, there are a lot more factors you need to be aware of, compared to trading through the higher volume sessions such as London and New York.
I would dissuade new traders or traders without years of track record from trying to forex trade at night. The trading conditions are typically much harder than during the high liquidity times of the day.
The Benefit Of Trading Forex At Night?
So, what are the benefits of trading forex at night? Well, the main benefit is the fact you’re able to get more time within the markets. If the only time you have everyday to trade is the night, then being able to trade at night is the benefit.
Trading at night does not necessarily mean you will perform better or worse, it is entirely dependent on your trading strategy and how it matches the conditions of this time.
There are typically a lot of smaller moves happening during the night. Due to many of the worlds leading financial institutions being closed for the day, you won’t see these large 100 pip moves that are more common during the London open, for instance.
The Drawback Of Trading Forex At Night?
There are a few serious issues with trading forex at night. These issues would actually stop me from trading at night, personally…
Lack of Volume –
There is a huge lack of trading volume if you’re trading forex at night. If you’re in the market for a longer period of time, you will find that it is very difficult to get your trades filled. You will likely experience slippage on many of your trades, resulting in you leaving the trade only to see the price move against you.
Higher Spreads –
Due to there being less liquidity in the markets, you’ll notice that spreads ‘the difference between the bid and ask price’ massively increase when trading at night. On a normal forex day you won’t notice spreads being that big (> 5 pips), this will definitely change if you’re trading at night.
Lack Of Liquidity –
A lack of liquidity is a huge issue for any trader, regardless of whether it’s day or night. During the high liquidity times, traders have the ability to leave their orders for a few hours and still see them filled in the near future. When trading at night, you won’t be able to do this nearly as much since there is such a lack of liquidity. If you decide to place an order that doesn’t get filled, then it’s possible your order will not be filled until the market opens.
No Opportunities –
As I’ve mentioned previously, the larger majority of the trading moves happen during either the London session, or the New York session. Typically, at night there are no good trends or easy to trade situations, at all.
During the night, if you’re not an extremely fast trader who can watch multiple timeframes at once, then there are typically no good trades to take advantage of. You’ll find that most of your trading strategies are done for during this period. This is because you’ll have to hunt so hard to find a trade and even then, it may not be as high quality as a trade during the day.
Trading At Night – What Would I Suggest?
I don’t recommend trading forex at night but there are still a few things you can do within the market to make use of this time every day...
Trading A Simulator –
Forex simulators are a great way to brush up on your skills whilst trading past market data. Since it’s past market data, you won’t have to worry about slippage or spreads eating into your trading accounts. You will have full control over any orders placed in the live markets.
You can tweak strategies, forward test ideas and grow your trading ability with 0 risk. No matter how slow or choppy the live markets are looking, you can use a simulator like Soft4Fx to make use of your time. I have a full backtesting guide here which you may find useful!
Trading The Right Currency Pairs –
If you’re serious about trading forex at night, you have to be using the right forex pairs or you won’t stand a chance. Some of the most liquid pairs that you can trade forex at night with include, AUD/USD and NZD/USD. These two pairs tend to be very active during this time and offer good opportunities for both day and night traders.
You’ll want to avoid any currency pairs that won’t have banks open during the hours you’re trading. For instance, if you’re from the U.K, trading EURGBP at 10pm would be a complete waste of your time. However, AUDUSD, you might see some trading volume with!
In Summary – Can You Trade Forex During The Night?
In conclusion, it’s possible to trade forex during the night as the market is open for 24 hours per day – but it’s not advised. The markets are slower, there are less good trading opportunities available and spreads tend to get higher. The best time of day to trade forex is during the London or New York sessions. These are typically when all of the major moves occur in the market.
You can use a simulator like Soft4Fx to train past market data and practise your strategies as much as you want without risking your live account. This way you can grow your trading knowledge and hone in on your skills with no loss or risk involved.
Do you trade forex at night? Let me know in the comments below…