Forex trading involves the exchange of currencies in a global decentralised market. It is the largest financial market in the world, with an average daily trading volume exceeding $7.5 trillion. The market operates continuously from Sunday evening to Friday night. Forex trading involves participants from various countries – including central banks, financial institutions, corporations, and individual traders.
The timing of trades in the forex market greatly impacts the outcome due to market liquidity and volatility variations. Liquidity is the ease with which a currency pair can be bought or sold without causing significant price changes. Volatility is the extent of price fluctuations within a given period, influencing trades’ risk and potential returns. Optimal trading times are periods when market activity is at its peak. They provide better opportunities for executing trades with favourable conditions.
The forex market is open 24 hours a day because of the overlapping time zones of major financial centres worldwide. This continuous operation is divided into four primary trading sessions: Sydney, Tokyo, London, and New York. Each has distinct characteristics and trading volumes. Traders can participate in any of these sessions, depending on their preferences and strategies.
These are the major Forex trading sessions:
The Sydney session opens at 10 PM GMT and closes at 7 AM GMT. It is the first major session to open for the week. Trading volume is generally lower during this session, but it provides an opportunity to estimate market sentiment before the Tokyo session begins. Key currency pairs in this session are AUD/USD and NZD/USD. They show activity in the Asia-Pacific region.
The Tokyo session opens at midnight GMT and closes at 9 AM GMT. It sees increased trading activity, particularly in JPY pairs – USD/JPY, EUR/JPY, and GBP/JPY. This session is influential for traders in Asia and influences the subsequent London session. Economic data from Japan and other Asian countries impact market movements during this period.
The London session opens at 8 AM GMT and closes at 5 PM GMT. It is the most active trading session. It experiences the highest trading volume and liquidity. Major currency pairs here are EUR/USD, GBP/USD, and USD/CHF. The overlap with the New York session creates intense market activity, often resulting in significant price movements.
The New York session opens at 1 PM GMT and closes at 10 PM GMT. It overlaps with the London session for several hours and causes high volatility and trading volume. Major currency pairs here are USD/CAD, EUR/USD, and GBP/USD. Economic data releases and market events in the United States affect this session. The New York session’s close is the end of the trading day. It often reduces activity and liquidity as the market transitions to the Sydney session.
Understanding forex market hours helps optimise trading strategy. Trading during high-activity periods, especially during session overlaps, maximises opportunities.
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