The forex market, also known as the foreign exchange market, is the largest financial market in the world. It is a decentralized market where currencies are traded 24 hours a day, five days a week. However, the forex market experiences slow trading hours at 4 pm. In this article, we will explore why the forex market is slow at 4 pm and what factors contribute to this phenomenon.
To understand why the forex market is slow at 4 pm, we need to first understand the different forex trading sessions. 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 has its own unique characteristics, and they overlap at certain times, creating more trading opportunities.
The Sydney session starts at 10 pm GMT and ends at 7 am GMT. It is the least volatile session and is typically used by traders to plan their trading strategies for the day. The Tokyo session begins at 12 am GMT and ends at 9 am GMT. It is the most volatile session, and it is during this session that most of the major currency pairs are traded. The London session starts at 8 am GMT and ends at 5 pm GMT. It is the most active session, accounting for about 35% of the daily forex turnover. Finally, the New York session starts at 1 pm GMT and ends at 10 pm GMT. It is the second most active session, accounting for about 17% of the daily forex turnover.
Now, let’s look at why the forex market is slow at 4 pm. At this time, the London session is coming to a close, and the New York session is about to begin. This creates a lull in trading activity as traders in London are closing their positions, and traders in New York are preparing for the upcoming session. The overlap between the London and New York sessions is the most active time of the day for the forex market, and traders tend to wait for this overlap to begin before initiating new trades.
Another factor that contributes to the slow trading hours at 4 pm is the lack of economic news releases. Economic news releases, such as the release of the non-farm payroll data or the GDP data, can cause significant volatility in the forex market. Traders tend to wait for these news releases before initiating new trades. At 4 pm, there are usually no major economic news releases, which can lead to a lack of trading activity.
Furthermore, the time of day can also affect the liquidity of certain currency pairs. For example, the AUD/USD and NZD/USD pairs tend to be more liquid during the Asian trading session, while the EUR/USD and GBP/USD pairs tend to be more liquid during the London and New York sessions. As a result, traders who specialize in trading certain currency pairs may find the 4 pm trading hours slow as the liquidity of their preferred pairs decreases.
In conclusion, the forex market experiences slow trading hours at 4 pm due to a combination of factors. The end of the London session and the beginning of the New York session creates a lull in trading activity, and the lack of major economic news releases can also contribute to the slow trading hours. Additionally, the liquidity of certain currency pairs can also play a role in the lack of trading activity. It is important for traders to be aware of these factors and adjust their trading strategies accordingly.
