Even though there is not a best time of the day to trade, there are certain hours that provide greater opportunities for active market participants.

In the U.S. stock market, these hours are somewhat limited. The stock market officially opens at 9:30 AM EST and closes at 4:00 PM EST. The prime time active trading hours for stocks are between 10:00 AM and 12:00 PM and between 2:00 PM to 3:30 PM.

When the stock market opens at 9:30 AM, there is a lot of volatility during the first half hour of trading and it become difficult to determine the general direction the stocks are going to be moving in. At around 10 AM, when the dust begins to settle, there is usually a better indication of the morning trend of stocks in general. Between 12 PM and 2 PM EST, many traders and other market participants are out to lunch and trading slows down quite a bit. Consequently, it is usually a good idea not to initiate new stock trades during this time.

Around 2 PM EST, trading activity starts picking up again and builds up until the close. During the last half hour of official trading, the market might get chaotic again, so (in general) it is not a good idea to get into new trades during this time. Even though some people will argue that it is possible to actively trade stocks in the pre-market and after-hours trading sessions, the lower liquidity makes it ill advised to do so.

Since Forex (foreign exchange) is a much bigger market than stocks and trading goes on for 24 hours-a-day approximately 5 days a week, there are many more opportunities throughout the day to trade actively.

Depending on what time zone a day trader lives in, he may choose one or various ranges of hours during the day to execute his trades. Since during the hours when the European financial markets are open (around 2AM EST to 11 AM EST) there is a lot of trading activity going on, this can be a perfect time to trade currencies.

Traders in the United States who are in Pacific Time can take advantage of these trading hours (as well as Europeans and traders from other countries in a similar time zone). The U.S. financial markets start at around 8AM EST and the stock market officially closes at 4 PM EST. Consequently, during this time range, the forex market is very liquid.

In general, from about 8 AM EST to about 2 PM, active trading can also be effectively carried out. Finally, at around 7PM EST the Asian markets open and activity on the USDJPY currency pair begins to pick up. This can be a great opportunity for some people who have day jobs, but want to give day trading a try.

In general, the only times that new positions shouldnt be initiated in the currency market are between 2 PM to 6 PM EST. The reason for this is that the US market is about to close (so foreign exchange activity slows down) and no major financial market in the world is open.