Wednesday, May 20, 2020

Forex Market Sessions


It’s time to learn about the different forex trading sessions. Yes, it is true that the forex market is open 24 hours a day, but that does not mean it’s always active the entire day.

Before looking at the best times to trade, we must look at what a 24 hours a day in forex world looks like. The forex market can be broken into 3 major trading sessions. The Sydney session, the Tokyo sessions and the London sessions.


Local Time

EDT

BST

SYD OPEN-7:00AM

SYD CLOSE-4:00BPM

5:00PM

2:00AM

10:00PM

7:00AM

TOK OPEN-9:00AM

TOK CLOSE-6:00PM

8:00 PM

5:00 AM

1:00 AM

10:00 AM

 

LON OPEN-8:00 AM

LON CLOSE-4:00 PM

3:00 AM

11:00 AM

8:00 AM

4:00 PM

 

Actual open and close times are based on local business hours, with most business hours starting somewhere between 7-8AM local time. Open and close times will also vary during months of October/November and March/April as some countries.

Now you are probably looking at the Sydney Open and wondering why it shifts two hours in Eastern time zone. Think that Sydney’s open would only move one hour when the U.S. adjusts for standard time, but remember that when the U.S. shifts one hour back, Sydney actually moves forward by one hour .

Also take notice that in between each Forex trading session, there is a period of time where two sessions are open at same time. For example, during the summer, from 3:00 to 4:00 AM ET, the Tokyo session and London session overlap. And during both summer and winter from 8:00 AM to 9:00 PM ET, the London session and the new York session overlap.

Naturally, these are the busiest times during the trading day because there is more volume when two markets are open at the same time. This makes sense because, during those times, all the market participants are dealing, which means that more money is transferring hands.

When trading currencies, a market participant must first determine whether high or low volatility will work best with their trading style. Trading during the session overlaps or typical economic release times may be the preferable option if more substantial price action is desired. The next step would be to decide what times are best to trade, accounting for a volatility bias. A trader will then need to determine what time frames are most active for their preferred trading pair.

Economic and political instability and infinite other perpetual changes also affect the currency markets. Central bank seeks to stabilize their countries currency by trading it on the open market and keeping a relative value compared to other world currencies. Business that operate in multiple countries seek to mitigate the risks of doing business in foreign markets and hedge currency risks.

Businesses enter into currency swaps to hedge risk, which gives them right but not necessarily the obligation to buy a set amount of foreign currency for a set price in another currency at a date in the future. They are limiting their exposure to large fluctuations in currency valuation through this strategy.

Currency is a global necessity for central banks, international trade, and global businesses, and therefore requires 24 hour market to satisfy the need for transaction across the various time zones.

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