Now you are a bit closer to forex: you know what it is, how you can benefit from it and who the market participants are. Let’s see when you can trade.
Do you remember what you previously learned about the advantages of forex , telling you that the market is open nonstop? Yes, the forex market is open 24 hours a day – allowing you to trade at any time of the day or night. You can trade 24/5 between 22:00 GMT Sunday – 22:00 GMT Friday.
There are 4 main forex trading sessions with opening/closing hours based on the biggest financial centers.
|New York Open
New York Close
*GMT (Greenwich Mean Time)
When to Trade?
Time is money. For this reason, in the 24-hour forex market, timing is critical. Good timing produces good profits. Yes, but which are the best hours/times to trade?
The hot zone is between 13.00 GMT and 16.00 GMT. This is the time when the London and New York sessions overlap.
What makes these hours powerful? Volume and volatility , because they reach their peak during these hours! During this time, the market is busy with active participants, currencies move very quickly, and the most important economic news is also published in this time period.
Volume means that a large number of lots are sold and/or bought for a particular currency pair; while volatility means that the price moves at a great speed.
Volume and volatility during power hours work like gasoline and a spark of fire. In a good way, though! What’s more, they may cause large movements in almost all currency pairs.
Which Currencies to Trade?
The currencies that you can trade because of their high activity and large movements are as follows:
Now let’s look at the characteristics of each of the trading sessions.
Asian Session (22:00 – 08:00 GMT)
The Asian session begins with the Sydney open (22:00 GMT) and ends with the Tokyo close (08:00 GMT).
Japan is the world’s third largest forex trading center and even though we call it the Tokyo session, this is not the only busy forex hub during this period. Hong Kong, Singapore and Sydney are active players here, too.
The most traded currency is the yen, of course, covering 16.5% of all forex transactions.
Now let us have a look at the main features of the Tokyo session:
- Approximately 21% of all forex transactions are carried out here
- Liquidity (i.e. currency sold without causing significant price movements) can be quite thin at times
- Because of this thin liquidity most currency pairs will trade within a range, especially if there is a big move in the preceding New York session
- Most activity takes place at the beginning of the session, as this is the time when economic news is released
- As during the Asian session economic news from Australia, New Zealand and Japan come out, you will most likely see stronger moves in pairs that contain JPY, AUD and NZD.
London Session (08:00-16:00 GMT)
London is considered the capital of forex and although there are several financial centers all around Europe, it is London that attracts the main interest as the key financial center. It is no wonder because the London session:
- Has a huge trading volume (over 32% of all forex transactions are carried out here)
- Has high liquidity
- Is the period with most market uptrends and downtrends
- Has lower spreads
- Volatility (i.e. overall price fluctuations) slows down a bit in the middle of the London period (for the simple reason that most traders are off for lunch) until the New York trading session starts
- Market trends may at times reverse just before the session ends as European traders decide to lock their profits.
New York Session (13:00-21:00 GMT)
When the London session traders come back from lunch, the New York (US) session starts.
Features that mark the US session are as follows:
- Roughly 19% of all forex transactions are carried out here
- Big market-moving potential: 85% of trades involve the US dollar
- High liquidity in the morning hours when it overlaps the London session
- Most economic news reports are released at the beginning of the session
- Liquidity and volatility decrease during the afternoon hours
- Little movement on Friday afternoon + high chances for trend reversal in the second half of the day.