The foreign exchange market is a global marketplace where currencies are exchanged around the clock. As the largest financial market in the world, it is open 24 hours a day, five days a week, allowing traders from different parts of the world to participate in trading. One of the busiest and most important trading sessions is the London and New York overlap, which occurs when both markets are open simultaneously.
The London and New York forex market overlap happens between 12:00 pm GMT and 4:00 pm GMT, which is between 8:00 am EST and 12:00 pm EST. This four-hour period is considered the most active and volatile time of the day, providing traders with an opportunity to make significant profits in a short period.
The London market is the largest forex market in the world, accounting for almost 40% of the daily trading volume. It opens at 8:00 am GMT and closes at 4:00 pm GMT. During this time, the European currencies such as the Euro, British Pound Sterling, Swiss Franc, and the Danish Krone are the most actively traded.
On the other hand, the New York market is the second-largest forex market in the world, accounting for almost 20% of the daily trading volume. It opens at 1:00 pm GMT and closes at 9:00 pm GMT. During this time, the US Dollar is the most actively traded currency, followed by the Canadian Dollar, Mexican Peso, and the Brazilian Real.
When these two markets overlap, there is a high level of liquidity, which means that there are more buyers and sellers in the market. This increased liquidity results in tighter bid-ask spreads, which means that traders can buy and sell currencies at a more favorable price.
The London and New York overlap is also the time when the most important economic news releases are announced, such as GDP, employment figures, and interest rate decisions. These announcements can cause significant volatility in the market, leading to sudden price movements.
Traders who are actively trading during this overlap need to be aware of the risks involved. The high level of volatility can lead to sudden price movements, which can result in significant losses. Traders need to have a solid risk management strategy in place and be prepared for unexpected events.
One of the strategies that traders use during this overlap is known as the breakout strategy. This strategy involves identifying key levels of support and resistance and waiting for a breakout to occur. If the price breaks through a significant level of resistance or support, traders can enter a position in the direction of the breakout, hoping to take advantage of the momentum.
Another strategy that traders use during this overlap is known as the trend-following strategy. This strategy involves identifying the direction of the trend and entering a position in the direction of the trend. Traders use technical indicators such as moving averages and trend lines to identify the direction of the trend.
In conclusion, the London and New York forex market overlap is the most active and volatile time of the day, providing traders with an opportunity to make significant profits in a short period. However, traders need to be aware of the risks involved and have a solid risk management strategy in place. By using the right strategies and technical analysis, traders can take advantage of the high liquidity and volatility during this overlap and make profitable trades.
