Forex or the foreign exchange market is the largest financial market globally, with an average daily trading volume of over $5 trillion. It is a decentralized market where currencies are traded 24 hours a day, five days a week. As the market is open 24 hours a day, it is divided into different trading sessions to accommodate traders from around the world. These trading sessions have different characteristics, and traders should know about them to make informed trading decisions. In this article, we will explain what are the trading sessions in forex.
The forex market is open 24 hours a day, five days a week, from Sunday 5 pm EST to Friday 5 pm EST. However, it does not mean that the market is active and volatile throughout the day. The 24-hour forex trading day is divided into four major trading sessions: the Sydney session, the Tokyo session, the London session, and the New York session. Each of these sessions has its unique characteristics, and traders should be aware of them to make the most out of their trades.
The Sydney session opens at 5 pm EST and closes at 2 am EST. It is the first trading session of the day, and it is not as liquid as the other sessions. As the market is still waking up, the Sydney session is usually characterized by lower volatility and lower trading volume. However, some currency pairs, such as the AUD/USD and the NZD/USD, are more active during this session as they are directly affected by the Australian and New Zealand economies’ news releases.
The Tokyo session opens at 7 pm EST and closes at 4 am EST. It is the second trading session of the day and is considered the most active session for the Asian market. As Japan is the third-largest forex trading center globally, the session’s currency pairs, such as the USD/JPY, EUR/JPY, and AUD/JPY, tend to have higher volatility and trading volume. The Tokyo session’s volatility is also influenced by the news releases from the Asian economies, such as China, Australia, and New Zealand.
The London session opens at 3 am EST and closes at 12 pm EST. It is the most active trading session globally, with the highest trading volume and volatility. As London is the largest forex trading center globally, the session’s currency pairs, such as the EUR/USD, GBP/USD, and USD/CHF, tend to have higher volatility and trading volume. The London session’s volatility is also influenced by the news releases from the European economies, such as Germany and France.
The New York session opens at 8 am EST and closes at 5 pm EST. It is the last trading session of the day and is considered the most active session for the North American market. As New York is the second-largest forex trading center globally, the session’s currency pairs, such as the USD/CAD, EUR/USD, and GBP/USD, tend to have higher volatility and trading volume. The New York session’s volatility is also influenced by the news releases from the North American economies, such as the US and Canada.
In conclusion, the forex market is a 24-hour market divided into four major trading sessions: the Sydney session, the Tokyo session, the London session, and the New York session. Each of these sessions has its unique characteristics, and traders should be aware of them to make informed trading decisions. As the market is open 24 hours a day, traders should also consider the overlaps between the sessions, as they tend to have higher trading volume and volatility. By understanding the trading sessions, traders can choose the best time to trade forex based on their trading strategy and risk appetite.
