Forex, or foreign exchange, is the largest financial market in the world, with an average daily trading volume of $6.6 trillion. It is a decentralized market where currencies are traded 24 hours a day, five days a week. As a global market, forex operates in different time zones, and understanding time zones is crucial for traders to know when to enter or exit trades.
The forex market is open 24 hours a day, except on weekends. The market opens on Sunday at 5:00 pm EST and closes on Friday at 5:00 pm EST. However, different financial centers around the world operate in different time zones, which means that the market is not always active at the same time.
To facilitate trading across different time zones, the forex market is divided into four major trading sessions: the Sydney session, the Tokyo session, the London session, and the New York session. Each session overlaps with the next, creating a continuous trading day.
The Sydney session is the first to open, starting at 5:00 pm EST on Sunday. It lasts for eight hours, until 1:00 am EST. This session is the least active, with the Australian dollar being the most traded currency.
The Tokyo session starts at 7:00 pm EST and ends at 4:00 am EST. It is the second session to open and the most active session in the Asian market. The Japanese yen is the most traded currency during this session.
The London session starts at 3:00 am EST and ends at 12:00 pm EST. It is the most active session and is often referred to as the European session. The most traded currencies during this session are the euro, the British pound, and the Swiss franc.
The New York session starts at 8:00 am EST and ends at 5:00 pm EST. It is the last session to open and the most active session in the American market. The US dollar is the most traded currency during this session.
It is important for traders to know the trading sessions’ timings to take advantage of the increased volatility and liquidity during the overlapping sessions. For example, the London and New York sessions overlap for four hours from 8:00 am EST to 12:00 pm EST, creating the most active trading session. This overlap is when traders can expect the highest volatility and liquidity in the market.
Forex traders also need to be aware of the daylight saving time changes that occur in different countries. Daylight saving time is observed in many countries, including the United States, Canada, and the United Kingdom. During daylight saving time, the trading sessions’ timings may change, and traders need to adjust their trading strategy accordingly.
The forex market operates on a 24-hour basis, and trading can happen at any time. However, it is important for traders to understand the different time zones and trading sessions to take advantage of the increased volatility and liquidity during the overlapping sessions. Traders should also be aware of the daylight saving time changes that may affect the trading sessions’ timings. By understanding the forex market’s time zones, traders can develop a trading strategy that takes advantage of the market’s movements and opportunities.
