Years ago we were studying a hot new forex strategy and the teacher of that method of trading said he stayed awake half the night because the London session was the most active session to trade. Call us natural skeptics, but we'd already come to see that not everything this teacher was telling us was based on fact, so we started wondering about whether this was true or not. Was the London session really the most volatile? And if so, was that true for all the major pairs or just some of them?

That's when it started… Our fanatic compulsion to prove things right or wrong. This spilled over into our analysis of the average hourly range of 7 of the major pairs. In fact, this is when Kim of CompassFX started calling us the "Fact Stat" girls, which was at the same time a compliment (because of our love for facts and statistics) and a bit worrisome (because when she first said it, it sounded like she was calling us the Fat Stat girls).  OK...onto what we found...

Trading friends started asking us for our data about the hourly ranges and we came to realize how important this analysis is and how few traders understand the movements of the markets over the course of the day. Soon after that we started posting this info here on our website, and we've been keeping track of this for the 7 major currency pairs ever since.  And because we're also artists and masters of Photoshop, we're able to put together killer cool graphics for you like this one for the AUDUSD:

The average hourly range of the AUDUSD forex currency pair 2007-2013

(By the way, if you own the Forex Smart Tools you always have access to this info from the Resource section of the Private Membership site, or through the Help menu of your Calculator or Trade Log. If you don't own the Smart Tools, you can see all this info by signing up to our email list in the blue band above. The first email you receive from us includes the link to our Resource center - free.  No charge.).

Why is knowing the Average Hourly Range of a currency pair you are going to trade important?  If you know this information, you can adjust your profit expectations to the time that you trade. You can also make sure that your stop is appropriate to the pair and the time of day.

Here's a good example: If you put on a trade for a currency pair that generally moves 15 pips during the next few hours you are trading (and there's no big news coming out), does it make sense to use a 40 pip stop? If you put on a trade with an 18 pip stop for a pair that averages 35 pips in the next few hours, does that make sense?  The answers are not always cut and dry and certainly depend on your own strategy and trade plan – but working with the specifics of the pair and the time of day or night that you trade will really help you refine your trade plan and allow you to make more intelligent choices. Or as we like to say: Trade Smarter – Not Harder!

Rather than just telling you the punch line of what moves when, we wanted to offer you this little quiz so you can see how well you understand the movements of the market. Take the quiz and find out how much you know. You'll be able to see the correct answers after you take it and hit the orange button at the end:

QUIZ: Understand The Average Hourly Range of Each Forex

If you’re going to be backtesting your strategy on the Forex Tester to see how well it will work for you going forward, it makes sense to know in advance which years have comparable average hourly ranges. For example in the early part of 2014, which two years are most likely to match the average hourly range for the EURJPY? (Pick 2 years)

 
 
 
 
 
 
 

The most active session for the JPY pairs (USDJPY, EURJPY, GBPJPY) is:

 
 
 

The most active session for the GBPUSD is:

 
 
 
 

The most active session for the EURUSD is:

 
 
 
 

The EURUSD now averages 30 pips of movement or more in its most active hour of the London session.

 
 
 
 

The time of least volatility during the London session is:

 
 
 
 
 
 

In the 7 year span 2007-2013, the two years with the highest average volatility per hour were: (Pick 2 years)

 
 
 
 
 
 
 

USDCAD: The average hourly range throughout 2013 was double the hourly ranges in 2012.

 
 
 
 

During the New York session, the most volatile hour is:

 
 
 
 

You want to trade the JPY pairs during Asia. You’ll find the most volatile hour to be:

 
 
 

You want to trade the GBPUSD; how much will it move in the Frankfurt hour (the hour before the London market opens) compared to when the London market itself opens?

 
 
 
 
 

USDJPY: The average hourly range throughout 2013 was double the hourly ranges in 2012.

 
 

Between what hours of the day does the EURUSD put in the greatest range?