Many traders are drawn to Forex because of the long trading hours Forex which this market provides. This creates possibilities and increased activity to trade off. Starting in the South before moving to the East, drifting West and finishing in the US, the Forex market is open for business 24 hours a day!
Like with any investment you should understand what it is you are participating in. With this in mind, knowing the basics of the (trading hours) Forex market, such as when it is open! The trading hours Forex are from Sunday 2200 GMT to Friday 2200 GMT, which gives traders the advantage of being able to trade at their own convenience. This in contrast to trade at particular times as per the equity market. Although it is open 24 hours a day week days, there are different segments to it.
There are four segments to the Forex market which are called sessions. They are the:
The last three have considerable liquidity as two of each overlap each trading hours Forex. No disrespect to our Aussie cousins, but although in cricket they are often the bee’s knees, within trading hours Forex they are relatively small time. As the result of the size and importance of each of their currencies, the overlap between Tokyo, London and New York leads to some of the busiest trading. It is useful to keep your eyes peeled during these overlap periods. When one of the major currencies opens, the first hour will often indicate what other traders are thinking.
We don’t propose to get involved in politics but to attract your eyes to two important trading hours Forex sessions. The London and New York sessions involve arguably the three most important currencies being traded: US dollar, Pound Sterling and the Euro. The London session opens between 0800 GMT and closes at 1700 GMT. The New York session opens at 1300 GMT and closes at 2200 GMT. The London – New York overlap between 1300 and 1700 GMT is particularly important.
The combination of USD, GBP and EUR being live at the same time, makes this one of the most liquid periods. This is not surprising when you consider the amount of traders from those countries who are active at that time. It is during this period where the Reuters/WMR benchmark spot foreign exchange rate is determined. For those seeking extra income, the late night session where you can trade USD and JPY is attractive as you have time to get home from work and analyse that day’s movements before placing a trade.
Although trading hours Forex are open all hours in the working week, this doesn’t mean the entire day is busy. There are some quiet periods which are frustrating as these have little volatility to profit from. If currency pairs are not changing price or the market is not going up or down, there is no Forex price action trading to take part in. Learning to stay calm and how to survive low-volatility markets could help to avoid emotion driven mistakes.
Usually markets are flat when they are waiting for a key economic release. Examples include the US non-farm payrolls or one of the major central banks releasing an interest rate decision. Once this data has been released, markets will light up as traders act on this information. You will have to decide if you want to take part in this frenzy! There will be opportunities provided but with the increased volatility you may find them hard to take advantage of.
Trading when everyone is having their porridge might leave you singing ‘I’m lonely’ and placing poorly timed trades. If you trade in thin markets, liquidity will be so poor that any trade will have a large effect on prices, causing increased volatility. Brokers will also charge increased prices on the spread due to the lack of liquidity. With thin market-induced volatility, you are also at risk of your stops being activated, resulting in your trade being closed.
Timing is everything in markets. Although timing the market is not recommended as few manage it successfully, knowing at what time not to trade is useful! Understanding what trading hours Forex are more likely to yield day trading opportunities means knowing when these occur. Find out how to trade successfully by trading when you know you can be successful!