The Best Time For Making Stock & Forex Investments

By Tomasz Wisniewski|

Published: September 02 2022, 08:42 GMT+0

The Best Time For Making Stock & Forex Investments

The stock market has always been a popular destination for people who want to earn a lot of money. However, due to its complexity and diversity, getting on the right path is not easy for newcomers in this field and you have to be ready for disappointments from time to time. 


This is a place where it is pretty much impossible to accurately predict future events even for the most experienced investors, so losing money is as easy as winning in the stock market. If you wish to accomplish successful results here, it is crucial to have specific knowledge and skills, and most importantly, you have to be able to control your feelings and emotions. 


The majority of newbies in the stock and Forex markets don’t know when is the best time to make investments. This fact is not entirely clear for experts as well since these two markets are highly volatile meaning that major alterations might take place even in a short period of time. 


Therefore, it is essential to be prepared for any turn of events and invest your funds wisely. Otherwise, the results might be fatal and you may end up losing a huge portion of your budget. In this article, we would like to inform you about the best time when you can invest in the stock and Forex markets in order to generate profits. 

Stock Market Monthly Performance Analysis 

For starters, we would like to provide a statistic regarding the monthly performance analysis of the stock market starting from 1950. There are a lot of events that occur during certain months that significantly affect the market movement, so you might encounter completely different numbers even when only one month has passed. The majority of businesses operate on a seasonal basis meaning that they can generate returns in the stock market only during those particular months. 


According to our analysis, starting from the 1950 year till this day, the lowest average return in the stock market was in June, as it has only shown 0.08%. During this period, June has generated a positive return for 38 years and it has experienced 34 down years. There are various reasons why this month has drawn such negative numbers, but mainly because June is the starting period of the holiday season and during this time, business owners and investors tend to take a little bit of rest. Hence, if you are willing to get profits in the stock market, then you should certainly refrain from investing in this period of time. 


As for the highest percentage of the average return, it was recorded in April since investors got 1.60% back on average during this month starting from 1950. April was up for 51 years and down only 21 years, so we can firmly say that this month was the most successful one. So, if you are looking for the best time to invest in stocks, then April is definitely the best option for you. 


According to Down Jones Industrial, the average monthly gain in April over the last 100 years was 1.46% and positive returns were shown 62% of the time. When it comes to the S&P 500 index, we are reading that the stock market has generated an average return of 0.88% in April 1928 which is way higher than the last 100 years’ average of 0.47%. The FTSE 100 indicator has shown that the average return of the stock market was 2.3% in April from 1996 to 2020 and the next best performing months include December with 2% and October with 1%. 

Reasons Why April and December Are Considered The Best Time


As we mentioned above, April is considered the best month to invest in stocks. There are a lot of arguments supporting this statement and it has been a debate for ages among expert investors in this market. 


One hypothesis is that investors are spending their tax refunds to purchase stocks during this period which induces share prices to go higher. Another factor might be the fact that institutional investors are cleaning up their portfolios in March by getting rid of those stocks that did not perform well. This is because they are obliged to report quarterly to shareholders and the first quarter is finished when March ends. 


As a result, these investors are left with some cash on the sidelines and buy back in! It is not entirely clear why this period is the strongest in the stock market, but by looking at statistics for the last 72 years, we can firmly conclude that April is the best month if you are thinking about making an investment. 


December is considered the best performing month in the stock market after April and the main reason is connected with Christmas here. This is also known as Santa Claus Rally theory when Equity markets rally over Christmas. It was first identified by Yale Hirsch back in 1972 and the basic meaning of this theory is that the stock market increases in value during the last five days of December and the first two days of the new year. 


There are various factors inducing this process and no one can tell exactly why this happens, but experts are saying that it has to do with tax considerations and investors purchasing stocks with the holiday bonuses. Hence, it is somewhat an end-of-year gift for every investor in the stock market, and that’s why it is considered one of the best times to invest in here. 

Forex Market Daily Performance Analysis

The Forex market is considered the largest one in today’s world with its size and liquidity, and the daily trading volume exceeds 6 trillion dollars here. So, it comes as no surprise that we are seeing tremendous numbers in terms of the average pip range for the major pairs. 


Before we provide exact statistics about which days are considered best for Forex trading, we want to explain how the pip range is calculated first. This process is very simple – you have to take the highest price point and subtract the lowest price point on a given trading day. For instance, if USD/EUR hit a high of 1.2052 and a low of 1.2022, then the pip range will be 1.2052 – 1.2022 = 30. 


We would like to analyze the average pip range for major currency pairs in the Forex market. Obviously, the most traded currency pair is USD/EUR which generates the highest pip range of 145 usually on Thursdays. As for the lowest number, it is shown on Sundays with only a 69 pip range. 


The next currency pair on our list is GBP/USD which has displayed the highest pip range of 179  on Fridays and the lowest one was during Sundays in this case as well. 


The same rule applies nearly to every major currency pair in this market including USD/JPY,  USD/CAD, EUR/JPY, and GBP/JPY. You will notice that the most action happens during the middle of the week for these pairs and the most inactive period is usually shown on Sundays. This is no surprise since Sundays are when people take a rest from everything, even trading. 

Best times to trade

In this section, we want to talk about the best times to trade in the Forex market. Generally, it is advised to trade when multiple trading sessions overlap here, for instance, 14:00 GMT is considered to be the optimum time to enter the market since in this period London is closing, and many are waiting to shift to New York. The same goes for Sydney and Tokyo as they overlap between 12:00 GMT and 07:00 GMT. So, you have to be aware of these periods to get the most profits in the Forex market. 


Moreover, you have to keep in mind the time when the market shows high liquidity. In Forex, the period between Tuesday through Thursday is considered the peak of trading activities. Hence, you have to be active during those days.


Also, remember that the London session is the busiest one in the Forex market since 30% of all trades take place during this period. 

The worst time to trade

It is also important to know about the worst times to trade in this market in order to avoid losing money. First of all, you should refrain from trading during national holidays here due to the fact that the Forex market is influenced by banks and the volume of Forex transactions is decreased when they’re closed.


What’s more, you have to read everyday news about the Forex market since a major political event and financial reports might induce serious alterations here. So, you have to avoid trading during these times. 


Finally, we want to mention that the amount of resources traded is very low during the Asian market sessions. Therefore, the average pip movements are too low to cover high spreads and it is advised to avoid trading during this period! 

The Most Profitable Periods In Stock and Forex Markets

There are all sorts of reasons inducing the beneficial periods of the stock and Forex markets. It is pretty much impossible to accurately forecast which day or month will bring the most benefits, but generally, April and December include the highest average returns in the stock market for the last few decades. 


As for the Forex market, it is recommended to trade when multiple trading sessions overlap here and the market shows high liquidity. However, you should refrain from trading when there are national holidays since banks are closed during this time, and also when some major political or economic event takes place on a given trading day.