Forex trading, also known as foreign exchange trading, is the buying and selling of currencies with the aim of making a profit. The forex market is open 24 hours a day, five days a week, and is the largest financial market in the world, with a daily turnover of over $5 trillion. However, despite its round-the-clock nature, there are times when the market is closed. So how come people can trade forex when the market is closed?
Firstly, it is important to understand when the forex market is open and closed. The forex market opens on Sunday at 5 pm EST (10 pm GMT) and closes on Friday at 5 pm EST (10 pm GMT). During this time, traders can buy and sell currencies on various trading platforms around the world. However, there are times when the forex market is closed, such as on weekends and public holidays.
Despite the market being closed, traders can still place orders and execute trades using certain tools and strategies. One such tool is the electronic communication network (ECN), which is a type of trading platform that allows traders to access the forex market even when it is closed. ECNs connect traders to market makers, who are financial institutions that provide liquidity to the forex market. This means that traders can buy and sell currencies at any time, even when the market is closed.
Another way that traders can trade forex when the market is closed is through derivative markets, such as futures and options. These markets allow traders to speculate on the future price of currencies, even when the forex market is closed. For example, a trader could buy a futures contract for a certain currency, with the expectation that the price will rise in the future. If the trader is correct, they can sell the contract at a higher price and make a profit.
Additionally, some brokers offer trading in forex pairs that are traded in different time zones. For example, a trader based in the United States could trade the Australian dollar against the Japanese yen, which is a currency pair that is traded in the Asian session. This means that the trader can still trade forex even when the US forex market is closed.
Furthermore, some traders use automated trading systems, such as expert advisors (EAs), to trade forex when the market is closed. EAs are computer programs that use algorithms to analyze the forex market and make trading decisions based on predetermined criteria. These systems can place trades automatically, even when the trader is not actively monitoring the market.
In conclusion, while the forex market may be closed at certain times, traders can still access the market and place trades using various tools and strategies. ECNs, derivative markets, trading in different time zones, and automated trading systems are just a few examples of how traders can trade forex when the market is closed. However, it is important to note that trading forex carries significant risk and traders should always do their research and practice risk management before entering the market.