To put it simply, the FX market operates on a worldwide scale but has no single controlling entity. The Forex market is most profitable to participate in when major regions’ trading time coincide.
When more people are trading, the spread between the asking price and the highest bidder tends to shrink. Traders can keep more of their profits at these times since less of their money goes to the market makers who facilitate currency trading.
KEY POINT
- London, New York, Sydney, and Tokyo are four major forex markets, and each has its own unique trading hours.
- Knowledge of the overlap between trading sessions is useful for traders.
- The volatility of the foreign exchange market is typically higher when trading hours overlap.
Here Are the Big Four Forex Markets
London, New York, Sydney, and Tokyo host four of the world’s largest foreign exchange markets. Many currency traders memorize the hours of operation, paying special attention to the overlap between markets.
The degree to which the prices of equities or currencies fluctuate increases when more than one market is active at once. Investors in foreign exchange may gain from the current climate of uncertainty.
Market volatility is feared by some investors due to the heightened risk it presents, but forex traders favour it due to the opportunity it presents for bigger gains.
Mastering the trading times also goes hand-in-hand with the type of trader you are. Click to see where you fall in.
Forex Market Trading Time Around The World
All transactions in the foreign exchange market occur electronically and take place between Sunday evening (Eastern Standard Time) and Friday afternoon (Eastern Standard Time) (EST). Monday through Friday, main exchanges in each time zone operate under different schedules. There are four main trading windows (all hours are in EST) that most retail traders pay attention to:
- Sydney: 5 p.m. to 2 a.m. (midnight)
- Tokyo: 7 p.m. to 4 a.m.
- London: 3 a.m. to 12 p.m. (noon)
- New York: 8 a.m. to 5 p.m.
While different from one another, the exchanges all deal in the same currencies. Consequently, when two markets are up for business, a large number of buyers and sellers of a given currency might be expected. In the foreign exchange market, bids and asks on one exchange quickly affect those on all other open markets. This narrows spreads on the market and boosts volatility over a variety of time frames.
- 8 a.m. to noon, with both the New York and London markets open
- 7 p.m. to 2 a.m., with both the Tokyo and Sydney markets open
- 3 a.m. to 4 a.m., with both the Tokyo and London markets open
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IMPORTANT NOTE
For many traders, the eight o’clock to twelve o’clock overlap between the New York and London exchanges is the most advantageous time to transact business. More than half of all FX deals occur in these two hubs. Trading is concentrated on the Singapore and Sydney exchanges between the hours of 5 and 6 p.m., when volume is significantly lower than in the London/New York window.
Expected trade volume is predicated on the premise that no substantial news will emerge, while exceptions are possible. If a political or military crisis were to occur during traditionally calm trading hours, it might cause both volatility and volume to jump.
There is a predictable pattern to the release of some pieces of market-moving economic data. Factors that have a significant impact on the economy include the number of people working, the Consumer Price Index (CPI), trade imbalances, consumer confidence, and consumer spending. If you know when this information is expected to drop, you can time your trades accordingly.
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