Forex trading, also known as foreign exchange trading, is a decentralized global market where traders buy and sell currencies. Unlike other financial markets, Forex is open 24 hours a day, five days a week. This means that traders can trade at any time, depending on their preferred trading strategy.
However, when it comes to determining when a new day starts in Forex time, it can be a bit confusing because the Forex market operates in different time zones. In this article, we will explain when a new day starts in Forex time and how it affects traders.
Forex Market Hours
The Forex market operates 24 hours a day, five days a week, from Monday to Friday. This means that traders can trade at any time between Sunday night and Friday night. The market is open in different time zones, which means that different trading sessions occur during the day.
The Forex market sessions are:
1. The Asian session (Tokyo session): This session starts at 12:00 AM GMT and ends at 9:00 AM GMT.
2. The European session (London session): This session starts at 8:00 AM GMT and ends at 5:00 PM GMT.
3. The American session (New York session): This session starts at 1:00 PM GMT and ends at 10:00 PM GMT.
Each session overlaps with the other, which means that there is a continuous trading activity throughout the day. This also means that traders can trade at any time they want, depending on their preferred trading strategy.
When Does a New Day Start in Forex Time?
A new day in Forex time starts at 5:00 PM EST (Eastern Standard Time), which is 10:00 PM GMT (Greenwich Mean Time). This time is also known as the rollover time or the end of day (EOD) time.
The reason why a new day starts at this time is because of the way Forex brokers operate. Forex brokers use the rollover time to calculate the interest that traders earn or pay on open positions. The interest is calculated based on the interest rate differential between the two currencies in the pair.
For example, if a trader has a long position in the AUD/USD pair, they will earn interest on the Australian dollar and pay interest on the US dollar. The interest is calculated based on the difference between the two interest rates.
If a trader holds a position overnight, the interest is calculated at the rollover time, which is 5:00 PM EST. If the position is closed before the rollover time, the interest is not calculated.
The Forex market operates in different time zones, which means that the rollover time may vary depending on the broker’s location. However, most brokers use the 5:00 PM EST time as the rollover time.
Implications for Traders
Understanding when a new day starts in Forex time is important for traders because it affects the interest they earn or pay on open positions. Traders who hold positions overnight will earn or pay interest based on the interest rate differential between the two currencies in the pair.
Traders who trade based on daily charts or use daily pivot points should also take into consideration the rollover time. The daily chart is based on the closing price of the day, which is the price at 5:00 PM EST. The daily pivot points are also calculated based on the closing price of the day.
Traders who use automated trading systems should also take into consideration the rollover time. The trading system should be programmed to close open positions before the rollover time to avoid paying or earning interest.
Conclusion
In conclusion, a new day in Forex time starts at 5:00 PM EST (10:00 PM GMT), which is the rollover time or the end of day (EOD) time. This time is important for traders because it affects the interest they earn or pay on open positions. Understanding the rollover time is crucial for traders who hold positions overnight, trade based on daily charts or pivot points, or use automated trading systems.
