It can be very difficult to work out the best time of the day to trade the FX markets, not least because of the decision is reliant on the type of approach use. But through research, there are a couple of ideas of when retail traders may perform at its peak.

Data from over 10 million real trades were collected and it was revealed that the traders were performing at their best between the hours of 5am to 10am GMT. At around these fundamental key points of the day, 53 % of trades generated a positive return. But when the New York session began, around 11am standard U.K. time, profitability fell nearly 46 %. There was a pattern of traders being more apt to lose as the New York session started.

Volatility is perhaps the primary reason. For instance, the hourly euro-dollar range at 1pm has been 42 pips over the past 10 weeks as compared with an average volatility of 20 pips prior to midday. This doubling of volatility is comprehensible as money flows from Europe from the U.S. in a fight over which will be the more dominant market.

As volatility builds up, so will the possibility of being permanently prevented. This will hurt the retail traders specifically as they tend to have extremely fixed stops. Indeed, the norm could be a stop as narrow as 20 pips, working with a broader stop loss and lower risk can be a solution as this may provide for more space for the trade to breath and be less affected by markets’ varying nature.

Another explanation is possibly the use of a range of bound trading systems. This was done using a simple test using Classic RSI Indicators (excluding the demanding period of the markets). The results were remarkable which conclusion can be drawn that a busy and demanding period is best avoided.