The forex market is the largest in the world–no financial market comes close to it in terms of trade volume. Forex trading does not happen from one particular location but rather it is carried out between participants via phone and electronic communication networks (ECNs) in multiple markets across the globe. Visit multibankfx.com
The market is open 24 hours a day all over the world, from 5 p.m. EST on Sunday until 4 p.m. EST on Friday. During any time of the day, you will find at least one market open. Often there are also overlaps in the hours between one region’s market closing and another opening. Since currency trading is conducted globally, you would find traders all over the world creating and meeting demands for a certain currency.
Why the 24-hour trade?
Forex trading has a 24-hour period because of the multiple international time zones, and the fact trades are carried out through a network of computers instead of a central location that shuts down after a point. Suppose if you find out that the U.S. dollar closed at a certain rate, it merely indicates at which the market in New York closed. This happens as currency is traded around the world even after New York’s close, contrary to how securities work.
Forex trading begins with the opening of the Australasia markets, followed by Europe, and then North America. When the markets of one region close another opens or have already opened, so trading in the forex market goes on. Some of the most active periods of forex trading are in a couple of overlapping hours between the different markets.
Forex market hours
International currency markets are inclusive of banks, commercial companies, central banks, investment management firms, hedge funds, and also retail forex brokers, and investors. Since we’re talking about a market that operates in different time zones, you are free to access it at any point of time excluding the weekend break.
The international currency market is not led by any one market exchange but it works with a global network of exchanges and brokers all over the world. Forex trading hours are based on the timing of the market of every country that takes part. Though the time zones may overlap, the widely accepted time zone for every region are as follows:
New York 8 am to 5 pm EST (1 pm to 10 pm UTC)
Tokyo 7 pm to 4 am EST (12am to 9am UTC)
Sydney 5 pm to 2 am EST (10 pm to 7 am UTC)
London 3 am to 12 noon EST (8 am to 5 pm UTC)
Best time to trade Forex
Simply because you have the option to trade any time of the day or night is not a good enough reason to actually put this into practice.
It is advised that one should be trading only in an active market when there are many forex traders opening and closing positions and so there’s a large volume of trades.
- London and New York are the two busiest markets. In the time frame when these two trading sessions overlap (London afternoon and New York morning) there is a lot of traffic in the market and it makes up for a majority of volume traded in the day market that is estimated to be worth $6 trillion.
- The U.S. dollar, the Euro, the Japanese yen, the British pound, the Australian dollar, the Canadian Dollar, and the Swiss franc are the top traded currencies. All seven of them are traded continuously during the time the forex market stays open.
- Forex brokers provide tighter spreads (bid and ask prices closer to each other) when the trading volume is at its peak. This implies low transaction costs for traders.
- Similarly, institutional traders also prefer to operate in the windows that witness higher trading volume, even though they are open to accepting wider spreads for the opportunity to trade as early as possible in case they have accessed some new piece of information.
Notwithstanding the fact that the forex market remains highly decentralized, it continues to be one of the most effective transfer mechanisms for its participants as well as a far-reaching access mechanism for the ones who want to predict from different parts of the world.
Trading volume
Of course, you can earn by trading when the market is doing well but did you know that it is also possible to earn when the market moves down? However, it would be hard to earn in situations when the market doesn’t move at all.
The market moves when there are plenty of trades. This explains why you should concentrate your energy during particular trading sessions.
The forex trading sessions are christened after important financial centers and are roughly based on the local “work day” of traders who operate from those particular cities. The trading volume is high when there are a good number of traders who are actively trading. This makes the market more active.
Price swings
Economic and political instability along with a number of other perpetual changes could have a lasting impact on the currency markets. Central banks often try to maintain the stability of their country’s currency by trading it on the open market and having a relative value in comparison to the other world currencies. Businesses that function in a number of countries also try to reduce the risks of conducting business in foreign markets and hedge currency risk.
In a bid to cut down the risks, businesses enter into currency swaps, because of which they may have the right but not necessarily the obligation to purchase a particular amount of foreign currency for a pre-decided rate in another currency at a date in the future. This strategy helps them limit their exposure to large fluctuations.
Trading with the time zone converter
Here’s how you can effectively use the Forex Market Time Zone Converter:
- Focus your trading activity in the trading hours for the three busiest trading sessions: Tokyo, London, and New York.
- A major chunk of the market activity takes place when one of these three markets open.
- The most active times are when two or more trading sessions overlap and remain open at the same time.
