The forex market has always been ahead of other financial markets when it comes to market hours. You have probably asked, when should I trade forex? Are there certain times better than others? All these questions are important and will eventually come to mind when trading. This article will help you answer these questions and give you a better understanding of the different market sessions. Some may overlook this topic but it all makes a difference when trading and trying to make a profit.
How The Forex Market Works
The forex market is composed of central banks, hedge funds, investment management firms, brokers, and investors. The market is open 24 hours a day, five days a week. Since the forex market is global it makes it accessible 24 hours. The reason is when one major market starts to close another one opens and the cycle continues.
Different trading sessions are named after the major financial hub in that region. This makes understanding which currencies are traded more in a certain region than others important. Timing can also determine the liquidity of the market for a specific currency pair.
Best Forex Market Hours
The forex market is not one market that opens and closes at certain times. Instead, it is a series of markets that trade different currency pairs more than others. All these markets can be summarized into four major markets:
- Sydney
- London
- New York
- Tokyo
These are the most active markets in their regions. Each opens and closes at different times. The markets are active at certain times more than others, this activity is usually the same and doesn’t change. While talking about trading periods, there are also times when the market is volatile and times when it is quiet. This volatility can cause the trader to miss opportunities to close or open positions. So be aware of these volatile periods to avoid any negative impact they may cause on your strategy and profits.
Other factors can change the favourability of when to trade versus not. Forex markets can be heavily impacted by certain news that may come out, such as economic announcements or even national bank policies. This type of news can cause the market price to rise or descend or become volatile and unpredictable. You should be aware of all the things that may impact market value and movement.
Major Market Hours.
The three main sessions in the forex market, when activity is at its peak, are divided into three groups. The three groups are the Asian session, the European session, and the American session. Other names that may be used for these groups are the Tokyo, London, and New York sessions. These are the top markets and the most active as most banks make their transactions in them. A large number of traders are also always active in these markets allowing them to be the main in the FX market. The following are the opening and closing times of these three markets.
- Asian (Tokyo): 11 pm to 9 am GMT
- European (London): 8 am to 6 pm GMT
- American (New York): 1 pm to 11 pm GMT
The time can change at certain seasons of the year. The only market that is not affected by that is the Tokyo market.
When, and When Not to Trade
The most common question asked is what are the best forex market hours. Another question that should be asked is when should I not trade. To answer these questions you must first identify your strategy and know how you need the market to be for it to work.
Some strategies require high volatility for them to be profitable. If that is the case the trader must look for a currency pair that has this at certain hours of the day. However not all strategies need high volatility and want to avoid them, if so the trader will avoid the times of day when the market is volatile.
Generally speaking, a low-liquid market is not beneficial for anyone. This makes it important to avoid trading hours that may occur this way. Another period where the market might be slow is at the beginning and end of the week. At these times traders are either just beginning and planning or finishing up the week.
Final Thoughts On The Best Forex Market Hours
The forex market is open 24 hours a day five days a week. It is the largest financial market in the world. The forex market is divided into many smaller markets around the globe. From all these markets there are four main markets: Tokyo, New York, London, and Sydney. These markets are the biggest and the most active.
All markets have certain hours when the price is volatile, others when market liquidity is low. These different times are what make knowing market hours important. When trading at a bad time it can impact your results negatively. Keep in mind your strategy determines what time works best for you.
