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When can you trade and why?  2022?  Benzinga


Although the advent of connectivity platforms and the meteoric rise of blockchain-based decentralized assets have recently challenged the concept of a global reserve currency, so far the US dollar remains king. Of course, this dynamic does not mean that the rest of the global financial sector is marching at an American pace.

Instead, demand for the greenback reawakens just as US investing sessions close for the day. Enter the wild and often unpredictable world of forex and the underlying dynamism of forex market trading hours. Thanks to a distinctive profile of demand structures and geographic realities, forex session times are essentially characterized by 24-hour trading.

This article discusses the basic breakdown of this unique financial sector.

The Reason Behind Forex Session Times

As with everything in life, the main reason for permanent trading hours in the forex market is demand. If there were no economic or financial imperative for 24-hour trading, the concept would probably disappear forever. For example, operating a financial exchange is not free. Even decentralized platforms such as cryptocurrencies consume significant amounts of energy.

The request also explains why some markets – especially domestic stocks – do not offer 24-hour trading. , closing at 4:00 p.m. ET. While some of the biggest stocks in the world are calling the US market, the volume of these securities as a whole declines significantly during unorthodox hours.

Given that the majority of Americans work regular hours, it frankly doesn’t make sense for stocks to exhibit the same trading hours on the forex market.

This last point segues into another reason why exchange hours operate 24 hours a day, almost every day – geographic realities. As soon as the bankers and other New York bigwigs come out, the suits in Japan arrive. Unlike domestic stocks, forex market hours are not tied to a specific participant base. Like a highly tuned sports car shifting from one gear to another, the forex firm simply focuses on another region.

In this way, a 24-hour currency exchange can be ideal for Americans who don’t live on the east coast. Since many West Coast worker bees might not return to their hives until around 9 p.m. ET, they would be locked out of open-market stock trading. However, against the background of the opening hours of the forex market, the fun has only just begun.

Finally, the trading hours on the foreign exchange market represent a geopolitical consequence. In August 1971, President Richard Nixon announced the suspension of the gold standard or the convertibility of the dollar into gold. According to the International Monetary Fund, this action effectively abolished the Bretton Woods system of fixed exchange rates.

The IMF’s website explains that “since the collapse of the Bretton Woods system, IMF members have been free to choose any form of foreign exchange arrangement they wish (with the exception of pegging their currency to gold): letting the currency float freely, pegging it to another currency or a basket of currencies, adopting the currency of another country, participating in a monetary bloc or being part of a monetary union.

Nations must find a relative standard to value the value of their currencies. Since this search for monetary meaning does not stop at a country’s time zone, the hours of the forex market are constantly changing.

Four Major Forex Markets

Although each nation related to the global financial sector operates under its distinct time zone, the bulk of forex trading takes place in these four regions (listed in order of business hours based on Greenwich Mean Time) :

  • Sydney: Taken as a whole, the FX market trading hours start in Sydney at 22:00 GMT. With the Tokyo market below, traders regard the Sydney opening bell as the start of the Asian session. Combined with other Asian markets such as Hong Kong and Singapore, the Asian session contributes around 21% of all forex transactions.
  • Tokyo: Representing the financial center that underpins the world’s third-largest economy, the Tokyo market represents a key area in the trading hours of the foreign exchange market. The Japanese yen is the most traded currency during the Broader Asian session, covering 16.5% of all FX trades.
  • London: Next to open is the London market, essentially the crown jewel of the forex market hours. Commanding a huge trading volume, over 32% of forex trading takes place in England’s capital.
  • New York: Last but not least, New York represents the caboose of the forex market hours. About 19% of all foreign exchange transactions take place in the Big Apple, with 85% of transactions involving the dollar.

Interestingly, each market area also exhibits a distinct business personality. For example, the Asian session sometimes exhibits low liquidity. However, price action may begin to move as fundamental catalysts in Australia, New Zealand and Japan materialize.

During the London session, volatility can be a bear to contend with until the middle of the period. This is because most traders take time out for lunch, potentially allowing retail traders to catch their breath.

Closer to home, the New York session tends to exhibit high liquidity in the morning, when it straddles the twilight of the London session. However, relatively little movement occurs towards the afternoon hours, especially near the Friday closing bell.

Most important hours of the Forex market

Although forex session hours encompass the entire span of the 24-hour clock, they are not traded every day. Saturday offers a rare respite while the market resumes on Sunday. Below is the schedule of the main forex market trading hours.

  • Sydney: Opens at 10 p.m. GMT, closes at 6 a.m. GMT
  • Tokyo: Opens 00:00 GMT, closes 08:00 GMT
  • London: Opens 8am GMT, closes 4pm GMT
  • New York: Opens 1pm GMT, closes 9pm GMT

Unlike a music festival where one act follows after the conclusion of the previous group, forex session times overlap with other regions. Primarily, professional traders prefer to participate during these overlapping hours due to the increased volatility. Without market velocity, traders struggle to extract net returns for their speculative activities. Additionally, higher liquidity tends to reduce bid-ask spreads, making it easier for traders to generate net profits.

  • Sydney and Tokyo: The overlap is happening quickly as after two hours of trading in the Sydney session, Tokyo opens.
  • Tokyo and London: Although not technically an overlap (Tokyo closes while London opens at 8:00 GMT), UK traders can accumulate important data from both the Tokyo and Sydney forex sessions, providing potential preparatory research.
  • London and New York: London straddles New York between 1:00 p.m. GMT and 4:00 p.m. GMT. Therefore, the first three hours in New York tend to be the craziest in terms of volatility.

Finally, keep in mind that according to the Bank for International Settlements (BIS) – an international organization that promotes international monetary and financial cooperation – trading in the foreign exchange market has a daily transaction amount of $6.6 trillion. . Thus, professional traders are trying to participate in a time when most of this money is changing hands.

When is the best time to trade Forex?

From an objective perspective, the best time to trade forex is between 8 a.m. ET and 12 p.m. ET. It was during this period that the London and US markets overlapped, effectively a marriage between the first and second largest individual forex markets.

Coming in second place would be the period when the Sydney and Tokyo markets overlap. Although not as volatile as the trades that occur during the London-US overlap, the old regions offer plenty of opportunities for professional and seasoned traders.

Still, the question of “best time” might be a philosophical one. In practice, the best exchange times are times when you can fully concentrate on the task at hand. Remember that unlike long-term orders on blue-chip stocks, forex market opening hours can be brutal as many stocks are condensed into a short period of time.

Anything less than full and absolute commitment is likely a recipe for disaster.

Price fluctuations in the Forex market

As the term implies, price fluctuations represent substantial changes in currency valuations. A virtually infinite number of catalysts can impose shock changes on the global monetary system, including economic recessions, political upheavals, and to use current events, military invasions.

While many investors avoid such volatile events, professional traders gravitate towards them. Essentially, more underlying currency movements translate to more opportunities for speculation. If currency pairs continued to remain fixed, there would be no incentive to trade in their path.

On the other hand, central banks do not share the same motivations as forex speculators. To stabilize their currencies, central bankers will allow their national currency to be traded on the open market, thus maintaining a relative benchmark against other international currencies.

Additionally, companies that operate in multiple countries deploy currency swaps to protect against the volatility and vagaries of foreign exchange market transactions. Currency swaps give holders the right but not the obligation to purchase a fixed amount of foreign currency for a fixed price in another currency at a future date.

Best Forex Brokers

Although forex market hours offer incredible flexibility to participants, this arena is not for everyone. Nevertheless, if you understand the complexities and risks associated with this industry, consider some of the best forex brokers.

Claim exclusive offers

  • CedarFX is not regulated by any major financial agency. The brokerage is owned by Cedar LLC and is based in St. Vincent and the Grenadines.

Frequently Asked Questions

Q

What time does the forex market open on Sunday?

A

The forex market opens at 22:00 GMT in Sydney. This translates to 6 p.m. ET in the US (also on Sundays).

Q

Is forex open on weekends?

A

The foreign exchange market is partially open during the weekend. Trading closes every Friday at 9 p.m. ET. It will resume on Sunday at 10 p.m. GMT.

Q

Is it good to trade at night?

A

For US traders physically based in the US, it is best to trade in the morning when the New York session overlaps the London session. However, night trading can be beneficial as the Sydney and Tokyo sessions overlap.


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