There are many things peculiar to the forex markets. The astounding statistics with regard to the number of participants, the volumes that are traded, the market cap, and the whole array of interesting facts that set forex aside from any other financial market.
But perhaps the biggest peculiarity of the forex is the fact that it is decentralized. In fact, forex is made up of a whole network of decentralized markets around the world. This is how forex trades are carried out all the time without stop.
So, when a market such as forex is essentially open 24 hours in all the weekdays, it might be a little challenging knowing when to enter and when to execute trades.
In this article, we want to answer this question once and for all. What are forex trading hours? When is the best time to trade in forex? And everything that can help you with your precise and perfect timing in the foreign exchange market.
Is Forex Available in All Parts of the World?
In answering the question of timing, first we need to clarify where forex takes place. Does every city have a forex market? Well, essentially yes. But the major foreign exchange markets that are part of the larger body of the forex market and the ones that have a deep and serious impacts on the FX trades are as follows:
The major forex markets around the world are located in Tokyo, Sidney, London, and New York. So from Tokyo to New York, this is how forex is open all the time.
Although, please keep in mind that there are many other forex markets. But these are the most important ones, with regard to their trading volume and the influence that they exert over the market as a whole. So, we are going consider these markets as our main points to set the best timing for forex traders.
What Constitutes the Best Forex Trading Hours?
What Constitutes the Best Forex Trading Hours?
As it was mentioned at the beginning, FX market are open 24 hours a day during the weekdays. This means forex is off during the weekend, which would be Saturday and most of Sunday.
Forex markets open up near the end of Sunday and close later on Friday. This would roughly give you a full 5-day window to trade. Not a very small window, is it? Yeah, we think so too.
So, you have 120 hours to trade in forex in any given week. Which one of these 120 hours is the best for trading foreign exchange?
Well the foreign exchange market has its own unique features, with regard to the assets being traded, which are of course foreign currencies. To be more precise, not the currencies themselves, but speculations over the price of foreign currencies against one another.
In any case, as a forex trader you need to remember that in the foreign exchange market the best time to trade is when the market is at its peak of activity.
Why? Because when the market has a high degree of activity or when trading volumes are higher, the volatility would be higher as well. For instance, imagine you can trade when the pip range is sitting comfortably, or rather very uncomfortably (that’s a joke trader only know), at around 80 pips. This is the perfect fertile ground for benefiting from quick price movements in currency pairs.
When Is Forex at Its Peak of Activity?
This is a very good question. And we will give you the actual and literal hours of when this trading activity is at its highest. But first, you need to know one key principle about this concept.
The highest activity in forex markets is seen when two markets overlap.
As the pendulum moves time forward from Japan toward to US, so does the forex market. This means at certain points two markets are bound to overlap. For instance, the London forex session with the New York forex session. And this creates the best opportunities for trading in forex.
Trading Hours of Major Forex Markets
Trading Hours of Major Forex Markets
Although there are many other forex sessions, the most important ones are the Sydney, Tokyo, London, and New York sessions as we saw above.
Their overlap would create the most active trading hours in FX markets. However, first, let’s see when these sessions themselves operate.
And please keep in mind that all the times are mentioned locally. So, to find out what time these markets operate in your time zone, you need to do a bit of conversion.
- Tokyo: 9 AM to 6 PM (Local Time)
- Sydney: 7 AM to 4 PM (Local Time)
- London: 8 AM to 4 PM (Local Time)
- New York: 8 AM to 5 PM (Local Time)
When Do Forex Sessions Overlap?
Surely you have realized thus far that the best time to trade in forex is when two markets overlap. And the reason is that overlapping markets result in higher volumes and higher prance ranges. And a higher price range means there are more opportunities to profit from trades.
We also discussed the major forex markets around the world. Now, let’s see when these markets overlap with each other:
- The Overlap of Sydney and Tokyo Sessions: this overlap which lasts two hours is among the longest overlaps. However, the trading volume is not among the highest. Since both Tokyo and Sydney markets are smaller than their western counterparts, their overlap does not yield the highest volume of overlapping forex sessions likewise. Nonetheless, it creates a great opportunity for trading Yen pairs or even Euro and Dollar pairs.
- The Overlap of Tokyo and London Sessions: as you might be able to guess, this overlap is the shortest overlap, given the fact that Tokyo and London are geographically very much so far apart. The overlap is only for an hour, but still due to the fact that Tokyo is one of the largest forex sessions and London, well you know about London session, their combo creates a great chance for forex traders.
- The Overlap of London and New York Sessions: the overlap of UK and US sessions is the biggest and heaviest FX overlap. It lasts for four hours and it offers the highest volume of trades. In fact, almost 3 out of 4 forex trades are carried out during this time window. Let that sink in. That is about 75 percent of all forex trades during these 4 hours out of the 120 hours.
Why Is Timing Important in Forex?
Why Is Timing Important in Forex
You might think a good trading strategy is a good trading strategy regardless of when it is executed. If a trade has the basis for being a profitable one, then it doesn’t matter when it is done.
While that may hold some truism, it just isn’t the case. As we saw above, out of the 120 hours that forex markets are up and running around the globe in various sessions, during the 4 hours of the overlapping window between the London and New York session, the majority of all forex trades are executed , In an article about: When to trade gold? We explained fully
This just cannot be overlooked. This stupendously high trading volume means the pip ranges will also be at their highest. Thus a skilled and smart trader will be able to benefit from these price changes.
Conclusion
Will timing have the final say in what is a good trade and what is not? Of course not. Timing alone is not the only factor that determines the outcome of forex trading. However, it is one of the most considerations to keep in mind when deciding to execute a trade.
In fact, there are so many other factors to take into account in order for a forex trader to be successful and make profitable and lucrative trades.
And of course among these factors timing is crucially important, as it will determine factors such as trading volume, liquidity, pip ranges, price movements, etc., all of which can heavily impact the outcome of trading in forex.
FAQ:
Q: What are forex market hours?
A: Forex market hours refer to the time period during which the foreign exchange market is open for trading. The forex market is open 24 hours a day, five days a week, from Sunday at 5 p.m. EST until Friday at 5 p.m. EST.
Q: How can I determine the best time to trade forex?
A: The best time to trade forex depends on a number of factors, including market volatility, economic news releases, and your personal schedule. It’s important to analyze these factors and develop a trading plan that aligns with your goals and risk tolerance. Additionally, traders should consider using technical analysis tools to identify potential entry and exit points.
