The FX market is the huge financial market in the world. Trading in the FX is not done at one midway location but is conducted between participants by smartphones and electronic communication networks (ECNs) in various global markets.
The expertise of the forex to trade over 24 hours is due in part to different international time zones. At any time zone, at least one market is open, and there are hours of overlap between one region’s market closing and another opening.
Forex trading time zone
The forex market is taking the industry by storm day by day. The trading week consists of 5.5 days per week, 24 hours a day. It begins in Asia Sunday afternoon Eastern Standard Time (EST) or Greenwich Mean Time (GMT) Sunday evening. It progresses each day until the close of trading in the United States.
- New Zealand trading is open from 2:00 p.m. to 11 p.m. EST starting Sunday.
- Sydney is open from 5:00 p.m. to 2:00 a.m. EST.
- Tokyo is open from 7:00 p.m. to 4:00 a.m. EST.
- Hong Kong and Singapore are open from 9:00 p.m. to 6:00 a.m. EST.
- Germany, Frankfurt, the primary European market, is open from 2.00 A.M.to 11:00 a.m. EST.
- London is open from 3:00 a.m. to 12:00 noon EST. London is open world’s largest forex trading center.
- New York opens from 8:00 a.m. to 5:00 p.m. EST. NYC is the second-largest forex center. Not surprisingly. Then, the greatest liquidity occurs when both London and New York are operating.
The importance of these three major trading sessions
Each day, there are three sessions: Asian, London/European, and American. The ideal time to trade is when two of the sessions overlap; thus, this timing is crucial. When they do, the extra liquidity ensures you receive the best rates because so many people want to accept your trade’s other side.
The second most visited period is from 1 to 3 a.m. EST, which combines the busiest European and Asian periods. The most active period comprises the most active European and American markets from 8 to 11 a.m. EST.
Asia is relatively quiet, with less liquidity; however, the Japanese yen (JPY) may trade actively if a significant financial event has occurred and Asian markets are responding to it.
Overlaps in forex trading time zone
The good time to trade is during overlaps in trading times between open markets. Overlaps equal higher price ranges, which means more opportunities. Here is a closer look at the 3 overlaps that occur daily:
USA/London (8 a.m. to noon): The biggest overlap occurs in the USA/London markets. More than 75% of all trades happen when these markets overlap because the USD and the euro (EUR) are the 2 most popular currencies to trade.
Tokyo/Sydney (2 a.m. to 4 a.m.): This time zone is not as volatile as the USA/London overlap, but it still offers a chance to trade in a period of higher pip fluctuation.
Tokyo/London (3 a.m. to 4 a.m.): This overlap sees a small amount of action because of the time (most U.S.-based traders won’t be awake at this time), and the one-hour overlap gives little opportunity to watch large pip changes occurs.
We covered three key trading sessions in this article, what kind of market activity can be expected throughout different periods, which time zone is best for traders and investors, and how we may incorporate this knowledge into a trading plan.
The ability of the FX market to trade over 24 hours is due in part to different global time zones and the fact trades are conducted over a network of PC rather than any one physical interchange that closes at a fixed time zone.
For instance, when you hear that the USD closed at a certain rate, it simply means that it was the rate at market close in New York. That is because currency continues to be traded worldwide long after New York’s close.
Just because you can trade the FX market any time of the day or night does not necessarily mean you should. The good time to trade is when the market is active, with so many forex traders opening and closing positions.