The foreign exchange (forex) market is the largest financial market in the world, with an average daily trading volume of over $5 trillion. However, there are times when the forex market is closed, and traders cannot buy or sell currencies. One of these times is on weekends, when the forex market is closed from Friday evening to Sunday evening. But why is the forex market closed on other days as well? In this article, we will explore the reasons behind the forex market closures.
Public holidays
One of the primary reasons why the forex market is closed is due to public holidays. These are days when banks and financial institutions are closed, and there is little to no trading activity. In the United States, for example, the forex market is closed on major holidays such as Christmas Day, New Year’s Day, and Thanksgiving Day. Similarly, in the United Kingdom, the forex market is closed on Christmas Day, Boxing Day, and New Year’s Day.
When a public holiday falls on a weekday, it can have a significant impact on the forex market. This is because many of the major players in the forex market, such as banks and hedge funds, are closed, and there is a reduced level of liquidity. This can lead to increased volatility and wider bid-ask spreads, making it more difficult for traders to execute trades.
Weekends
Another reason why the forex market is closed is due to weekends. The forex market is open 24 hours a day, five days a week, from Monday to Friday. However, it closes on weekends, from Friday evening to Sunday evening. This is because most banks and financial institutions are closed on weekends, and there is little to no trading activity.
While the forex market is closed on weekends, there are still some events that can affect currency prices. For example, major economic news or geopolitical events can occur over the weekend, which can cause significant price movements when the forex market reopens on Monday.
Market holidays
Apart from public holidays, there are also market holidays that can cause the forex market to close. These are days when the exchange where a particular currency is traded is closed. For example, the Tokyo Stock Exchange (TSE) is closed on Japanese public holidays, which means that the Japanese yen cannot be traded during these days.
Similarly, the forex market in the United States is closed on Martin Luther King Jr. Day, Presidents’ Day, Memorial Day, Independence Day, Labor Day, Columbus Day, and Veterans Day. These are days when the stock exchange in the United States is closed, and there is no trading activity.
Final thoughts
In conclusion, the forex market is closed on public holidays, weekends, and market holidays. These closures are necessary to ensure that the market operates efficiently and that traders have access to liquidity when they need it. While these closures can be frustrating for traders who want to execute trades, they are a necessary part of the forex market’s functioning. As a trader, it is important to keep track of forex market closures and plan your trades accordingly.
