Forex trading times-WWNEED.COM
Since forex trading is done electronically with the presence of only four global central exchanges, it becomes necessary for investors to know the trading times in this currency market.
The foreign exchange market is the most liquid financial market in the world with over $5.3 trillion traded daily. The forex market is a market independent of the stock exchange, and therefore it does not constitute a central physical exchange where currencies can be traded, unlike stocks that are traded on multiple financial and central exchanges.
The foreign exchange market is a market that operates between banks, where large banks act as makers of this market in a way that allows them to offer their own prices. This means that there are far fewer trading restrictions such as when and where you can trade, unlike the stock market trading hours, in which traders must adhere to a set schedule of weeks and hours.
In the foreign exchange market, the optimal time to trade is when the market is most active. That is, when the spreads (the difference between the bid and ask prices) start to narrow. In these cases, less money goes to market makers who facilitate currency trading, and this enables traders to make more money.
In this article, we will help you learn all about the working hours of the foreign exchange market so that you can adopt your own daily trading routine that works for you and your pocket.
4 major forex trading centers in the world:
The four main forex centers/sessions are located in London, New York, Sydney, and Tokyo. Forex traders need to keep checking and adjusting their hours, paying particular attention to hours when two stock exchanges overlap at the same time.
When more than one exchange is open at a time, this increases trading volume and adds volatility – the extent and rate of change in stock or currency prices. Volatility can often benefit forex traders.
This may seem a bit contradictory since investors have always feared price volatility and market volatility. However, in the forex game, greater volatility often translates into opportunities for a greater return.
The forex market is open 24 hours a day, from Sunday evening until Friday evening. This is because of the need to take into account all the different international time zones, as this allows you to trade during all hours of the day in whatever country you are.
Forex market working hours:
During the fall and winter months, the TSE opens to traders at 12 am and closes at 9 am UK time. It is one of the largest forex trading centers worldwide, with nearly a fifth of all forex transactions occurring each day in this session. During the Asian session, there is likely to be more movement in currency pairs containing the yen, as well as other Asia-Pacific currency pairs such as the AUS/USD pair.
The London Stock Exchange opens at 8am UK time and accounts for approximately 35% of all forex transactions (estimated at £2.1 trillion per day). Due to the high volume of trading during the London session, it is likely that there will be lower spreads due to the higher liquidity. However, the London session also has high volatility, which often makes it the best session for trading major currency pairs, which offer lower spreads due to the high volume of trades. This session ends at 4 pm.
The NYSE then opens at 1pm and closes at 10pm UK time. There is usually more liquidity at the beginning of the New York session because of its overlapping time with the previous London session. Then, towards the end of the session, there is minimal movement as the trading day comes to a close.
The Sydney session, on the other hand, takes place from 8pm to 5am UK time to complete the 24 hour loop of forex trading.
More about trading times in the currency market:
It is very important to mention that forex trading takes place electronically and is available everywhere in the world, between 5 pm on Sunday and 5 pm on Friday according to Eastern Time (EST). Each exchange has its own unique trading hours within this Monday through Friday.
The working hours of the four forex trading centers that we mentioned earlier are in Eastern Time, as follows:
London: from 3 am to 12 noon.
New York: 8 am to 5 pm.
Sydney: 5 pm to 12 am (midnight).
Tokyo: 7:00 p.m. to 4:00 a.m.
While each exchange operates independently, they all trade the same currencies. Therefore, when two exchanges operate at the same time, the number of traders buying and selling a particular currency increases exponentially. The bids and requests in the first forex market immediately affect the bids and requests of the second forex market. This leads to lower and lower spreads in the market and increase volatility. This occurs within the following time domains:
From 8 am to noon: with the New York and London stock exchanges open.
From 7 pm to 2 am: with the opening of the Tokyo and Sydney stock exchanges.
From 3 am to 4 am: with the Tokyo and London stock exchanges open.
The New York Stock Exchange is particularly important to foreign investors. Its trading includes the US dollar, which participates in 90% of all currency trading. Dollar movements could have a strong ripple effect around the world.
The best times to trade in the currency market:
Theoretically, the best time to trade is when the market is most active i.e. when the largest volume of trades is happening at one time. This climate provides high liquidity and tight spreads. Therefore, the best time to trade is when the open markets overlap. The heaviest overlap is between the London and New York sessions.
During this time there is also high volatility, so although there are initially tight spreads, major economic news announcements can cause them to widen. However, high volatility can be in your favor when trading the forex market. Check out our risk management guide to learn more about managing volatile markets.
The London Forex market is also the busiest market of all, especially in the middle of the week. However, trading on Friday offers less volatility as fewer people are trading and this makes for less liquidity.
It also depends on the currency pair you are trading on a particular exchange as well, for example trading on the Japanese yen will be more convenient during Asian stock exchange working hours.
In more detail, the best time to trade forex is from 8 am to noon with the New York and London stock exchanges overlapping. These two positions account for more than 50% of all forex trades. Then from 5pm to 6pm mostly trading across the Singapore and Sydney stock exchanges, but the trading volume is much lower than during the London/New York trading time.
There can be exceptions, and expected trading volume is generally based on the assumption that no significant news will emerge. Political or military crises that develop during slow trading hours can increase volatility and trading volume.
Some economic releases that can move the market have a fixed release schedule. They include unemployment rates, consumer price index (CPI), trade deficit, consumer confidence and consumer consumption. Knowing when this data will be released can help determine when the right time to trade.
High volume forex trading hours are risky:
Forex traders need to be careful, because currency trading often involves high leverage rates of 1000 to 1. While leverage can provide great profit opportunities, it carries the risk of an investor losing his entire capital in a single trade.
A study by Citibank found that only 30% of retail forex traders are profitable. Remarkably, 84% of those surveyed believe they can make money in the forex market. The thing is, new forex investors should get demo accounts with companies that offer demo trading platforms for new traders. This allows them to place mock trades to practice trading in a real trading environment without risking their money. Once the new investors understand the rules and basics of this money game and become sufficiently experienced, they can then confidently start making real forex trades.
As with any other type of investment, despite the opportunities for making money, one must also take into consideration that there are many chances of losing it. So, be sure to learn the ins and outs of forex trading before entering it.
Most volatile forex pairs:
The level of volatility depends primarily on the liquidity of the currency pair, and is shown by how much the price has moved over a certain period of time. This, in turn, affects the spread, as the price movement is depicted in pips. There will be pairs with a higher level of volatility naturally, but there are many other external factors that can lead to an increase in the volatility of the pairs.
The most volatile major currency pairs include:
Major currency pairs have lower volatility compared to exotic pairs, as when liquidity is high, there is less volatility. Currency pairs from more developed countries have lower volatility because prices are usually more stable. There is also a decline in supply and demand for currencies from emerging markets.
Major news events such as Britain’s exit from the European Union, for example, can cause turbulence and widening spreads. Prices can also be affected by higher interest rates or sharp increases in commodity prices.
Trading low liquidity pairs naturally means having to take higher risks and is recommended for more experienced traders who have done their research and have a risk management strategy in place.
Frequently asked questions:
How does forex trading work?
When trading forex, it is simply the trading of different foreign currencies in order to make money from the changes in the values of the currencies relative to each other. Most of this trading happens via electronic platforms or over the phone rather than on exchanges. Each transaction includes a currency pair.
How many trading hours does a trader need each day to make money in forex?
Your ability to make money trading forex depends on the percentage of trades you win and how much you earn from individual trades. The average trader who trades for two hours a day during peak hours can make close to 100 trades in a month.
How do I start trading forex?
To start trading forex, you only need to make an initial deposit with a brokerage firm. Many brokerages do not have a minimum forex trading, but you usually need to deposit between $50 and $500. It’s also smart to familiarize yourself with the basics of the industry and practice making trades before you start risking your money with real forex trading. You can try demo trading on many electronic trading platforms.
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