The foreign exchange market, commonly known as the forex market, is the largest financial market in the world. It operates 24 hours a day, five days a week, and is the platform where currencies are bought and sold by traders, investors, institutions, and governments. The forex market has no physical location and is decentralized, meaning that it operates electronically through the interbank market. The market opens on Sunday at 5 pm EST and closes on Friday at 5 pm EST. However, there are some important things to consider when it comes to the forex market closing on Friday.
Forex trading hours
Forex trading hours are divided into four sessions, each with its own trading hours. The four sessions are the Sydney session, the Tokyo session, the London session, and the New York session. The Sydney session opens at 5 pm EST on Sunday and closes at 2 am EST on Monday. The Tokyo session opens at 7 pm EST on Sunday and closes at 4 am EST on Monday. The London session opens at 3 am EST and closes at 12 pm EST. The New York session opens at 8 am EST and closes at 5 pm EST. These trading hours are subject to change during daylight saving time.
Forex market closing on Friday
The forex market closes on Friday at 5 pm EST and reopens on Sunday at 5 pm EST. However, there are some things to consider when it comes to forex trading on Friday. Firstly, liquidity tends to decrease towards the end of the trading week. This means that there may be fewer traders in the market, which can result in wider spreads and increased volatility. Secondly, some forex brokers may close their trading platforms early on Fridays, particularly during holiday periods. This can prevent traders from entering or exiting trades during the last few hours of Friday trading.
Weekend gap risk
Another important consideration when it comes to the forex market closing on Friday is the weekend gap risk. This is the risk that the price of a currency pair can gap up or down when the market reopens on Sunday. A gap is a difference between the closing price on Friday and the opening price on Sunday. Gaps can occur due to a variety of factors, such as news releases, economic events, or geopolitical tensions. Gaps can be particularly volatile and can cause significant losses if a trader has an open position in a currency pair that gaps against them.
Managing weekend gap risk
To manage weekend gap risk, traders can take a variety of measures. One strategy is to close all open positions before the market closes on Friday. This can help to avoid the risk of a gap opening against a trader’s position. Another strategy is to use stop-loss orders to limit potential losses in the event of a gap. Stop-loss orders are orders that automatically close a position when the price reaches a certain level. Traders can also use limit orders to take profit at a certain price level, which can help to lock in gains before the market closes on Friday.
Conclusion
The forex market closes on Friday at 5 pm EST and reopens on Sunday at 5 pm EST. However, there are some important things to consider when it comes to forex trading on Friday. Liquidity tends to decrease towards the end of the trading week, and some forex brokers may close their trading platforms early on Fridays. Additionally, there is a risk of weekend gaps, which can cause significant losses if a trader has an open position in a currency pair that gaps against them. To manage weekend gap risk, traders can close all open positions before the market closes on Friday, use stop-loss orders, or use limit orders to take profit at a certain price level.
