Why timing can be the key in forex trading?

antonyyu3

Trader
Mar 14, 2024
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Understanding the 24-Hour Forex Market

The forex market is the world's largest and most liquid financial market, trading trillions of dollars daily. One of the features that separates the forex market from other financial markets is its 24-hour market access. The party never ends except for weekends and particular holidays (Christmas and New Year’s Day).

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The forex market is open 24 hours a day, 5 days a week. There are four major forex trading sessions: London, New York, Sydney, and Tokyo. Each session opens 8 hours per day from Monday to Friday. Here you can view the open and close times of the 4 major forex trading sessions in GMT.

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Notice that the trading session times can be impacted by summer time, also called daylight saving time (DST) and winter time. The trading hours will shift when some countries move into DST. And some countries, like Japan, do not observe DST. The summer trading hours start in April and run into October. Conversely, the winter trading hours begin in October and end in April.

Choosing the Right Time to Trade

But what are the optimal times to trade? Honestly, nobody trades 24 hours per day. Instead, many traders trade during overlaps in trading times between open markets. You can see the overlaps between sessions shown in the image below. These overlap sessions are considered active trading hours and the busiest times during the day.

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The forex market is highly liquid, but overlapped trading sessions tend to have the highest liquidity levels, which means the bid/ask spread will be tighter and result in more reliable execution. With tight spreads, traders can get into a more desired position and speculate price movement at a lower cost. There is more volume when two markets are open which results in higher degrees of volatility and prices movement. And the most traded currency pairs, like EURUSD, will experience a wider average pip movement in the London-New York overlap session, creating more opportunities for traders.

The most active hours:

London-New York Sessions: 1:00 PM to 4:00 PM GMT (DST)

Tokyo-London Sessions: 7:00 AM to 8:00 AM GMT (DST)

Sydney-Tokyo Sessions: 12:00 AM to 7:00 AM GMT (DST)

It’s suggested to verify these times during the summer time period. Slight variations can occur depending on different sessions.

Where to trade forex?

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Note that this article is informational and does not constitute financial advice. Trading CFDs involves risk, so before trading, ensure you are proceeding with caution and careful consideration regarding your financial state.