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What is the first hour of the day in the forex markets?

The first hour of the day in the forex markets is an important time for traders. It is the period when the market opens, and the first hour is often referred to as the “power hour.” This is the time when liquidity is high, and the market is most active. In this article, we will explain what the first hour of the day in the forex markets is and why it is essential.

Forex Market Overview

Before we dive into the first hour of the day in forex, let’s have a brief overview of the forex market. Forex is an abbreviation for foreign exchange, and it is the largest financial market globally, with a daily trading volume of over $5 trillion. It is a decentralized market, which means it doesn’t have a central exchange. Instead, it operates through a network of financial institutions, including banks, brokers, and dealers, who trade currencies electronically through the internet.

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The Forex Market Hours

The forex market operates 24 hours a day, five days a week, starting from Sunday evening in Sydney, Australia, and closing on Friday evening in New York. However, it doesn’t mean that the market is equally active throughout the day. The forex market has four main trading sessions that overlap at some point, and each session has its characteristics.

The four main forex trading sessions are:

1. Sydney Session

2. Tokyo Session

3. London Session

4. New York Session

The first hour of the day in the forex markets varies depending on the time zone you are in. In Sydney, the first hour of the day starts at 8:00 AM local time, while in New York, it starts at 8:00 AM Eastern Time. However, for the purpose of this article, we will consider the first hour of the London session, which starts at 8:00 AM London time.

The First Hour of the London Session

The London session is one of the most active trading sessions in the forex market. It is the second-largest forex trading center after New York and contributes to over 30% of the daily forex trading volume. The London session starts at 8:00 AM London time and ends at 5:00 PM London time. However, the first hour of the London session is the most active period of the day, and it is known as the power hour.

Why is the First Hour of the London Session Important?

The first hour of the London session is critical for several reasons. Firstly, it is the period when the market opens, and there is a surge of liquidity as traders from Asia and Australia close their positions, and traders from Europe start their day. This increased liquidity often leads to a high level of volatility, and traders can take advantage of this to make profits.

Secondly, the first hour of the London session is when most economic news releases are published. Economic news releases such as GDP, inflation, and unemployment data can have a significant impact on currency prices. Traders need to be aware of these releases and their potential impact on the market.

Thirdly, the first hour of the London session is the period when traders set their trading strategies for the day. Traders analyze the overnight price action, review their positions, and look for potential trading opportunities. This period of the day is the most important for traders who use technical analysis to make trading decisions.

Tips for Trading the First Hour of the London Session

Trading the first hour of the London session requires a different approach than trading other periods of the day. Here are some tips for trading the first hour of the London session:

1. Be aware of the economic news releases and their impact on the market.

2. Use tight stop-loss orders to limit potential losses in case the market moves against you.

3. Avoid trading during the first 10-15 minutes of the session when the market is most volatile.

4. Use technical analysis to identify potential trading opportunities.

5. Monitor the price action closely and be ready to exit your position if the market moves against you.

Conclusion

The first hour of the day in the forex markets is an important period for traders. It is the period when the market opens, and the first hour is often referred to as the “power hour.” This is the time when liquidity is high, and the market is most active. Trading the first hour of the London session requires a different approach than trading other periods of the day. Traders need to be aware of economic news releases, use tight stop-loss orders, avoid trading during the first 10-15 minutes of the session, use technical analysis, and monitor the price action closely. By following these tips, traders can take advantage of the high volatility and potentially make profits.

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