There are many unique characteristics that define the forex market, from its inflated leverage to the derivative nature of international currencies
Another key distinguishing factor is the market’s opening hours, with the global forex market accessible 24 hours a day from 5pm on Sunday to 4pm Friday each and every week.
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But what are the market’s precise opening hours for global traders, and when is the best time to execute orders?
The Forex Market’s Opening Times
The global forex market is split across three different geographical sessions, the first of which commences when the Tokyo Stock Exchange options.
This is one of the largest forex trading centres in the world, which opens at 12am GMT before closing at 9am GMT. Roughly one-fifth of all forex transactions occur during this trading session, which is unsurprising given its length and duration.
At this time, there’s also likely to be more movement in currency pairs containing the Japanese yen, alongside Asia-Pacific pairings such as the AUD/USD.
Next up is the London session, which starts at 8am GMT (when the London Stock Exchange opens) and closes at 4pm GMT. This is arguably the most seminal trading session in the marketplace, accounting for approximately 35% of all transactions and $2.1 trillion in investment on a daily basis.
Due to the increased trading activity seen during the London session, there are likely to be lower forex spreads and higher liquidity, which is largely good news for traders (particularly those with short-term strategies such as scalping).
Midway through the London session, the New York Stock Exchange opens in North America. This commences a third trading session that runs from 1pm GMT to 10pm GMT, creating an initial two-hour crossover when the Sydney Stock Exchange opens at 8pm GMT.
The Sydney session (which kickstarts Asia-Pacific trading activity in earnest) also closes in conjunction with the Tokyo exchange at 4am GMT, completing a 24-hour trading loop that sees variable levels of activity at different times across the globe.
The Fundamental Nature of the Market and the Best Times to Trade
Obviously, the nature of trading activity changes throughout the various sessions, with Asian and Asia-Pacific currencies the most popular during the Tokyo Stock Exchange and assets including the pound and the US dollar (USD) widely traded between the hours of 8am GMT and 4pm GMT.
So, you may tailor the timing of your trades to suit your target currency pairings, in order to capitalise on peak volatility and optimal levels of activity.
Of course, theory dictates that the most effective time to trade forex is during peak periods of volatility, so it may also make sense to target time-frames where two separate sessions overlap in a bid to increase profits.
This also translates into higher liquidity and tighter spreads, which is also why so many investors look to trade freely during the lucrative London trading session.
The longest overlap occurs during the London and New York trading sessions, as this sees up to three hours of tighter spreads and high volatility. Of course, the spread could still widen depending on major economic news events and macroeconomic factors, but in general terms, increased volatility creates more opportunities to profit and optimise returns.
Just note that trading volumes and activity tend to diminish on Fridays, creating lower volatility even during session crossovers.
This also impacts liquidity, potentially making it harder to buy and sell even major currency pairings in real-time.
Ultimately, you’ll need to identify a time-frame and strategy to suit your own outlook as a trader, but there’s no doubt that periods of peak volatility offer the most opportunity to general investors.
Also you can read about a basic guide to forex trading in Forbes.
