FOREX TRADING HOURS
A prominent investor once said that forex investors come in different sizes and shapes – not only in terms of strategies and trading horizons, but also when it comes to their portfolio size, the sophistication of their tactics, and their market insight.
Tactical sophistication is important in forex trading – but so is the trading interval you choose to implement your trading plan and tactics. Some forex investors like to trade when the sun sets in Tokyo, while other get their mojo with a cup of coffee before the London market opens. Whatever trading interval you choose, make sure you understand how the trade day works, what weekend trading means, and what the best trading hours are.
The general forex trading calendar spans 24 hours from Monday through Friday, nonstop. Here is a quick breakdown of the trading hours, in GMT, for the top 10 forex centers in the world.
|Region||City||Open (Local Time)||Close (Local Time)||GMT Delta|
As the global market for currency exchange, the forex market features many currency pairs. But the thing is, not all pairs are equal, and some carry more financial weight than others. Therefore, you really want to focus on currencies that offer higher trading volumes and, thus, more liquidity. Major currencies include the U.S. dollar, British pound, euro, Canadian dollar, Australian dollar and Japanese yen. Consequently, the most suitable forex trading hours are intervals when the U.S., European and Asian markets are open.
To see clearly what we are talking about, take a look at our trading time overlap chart below (GMT). The best trading times, in terms of volatility and news items, run from 1:00 p.m. GMT to 4:00 p.m. GMT, and from Midnight GMT to 6:00 a.m. GMT. Note, though, that transactional volume is generally low when Asian and Oceania markets are open.
TRADING TIME OVERLAP AMONG MAJOR FINANCIAL CENTERS
The Asian trading session kicks off the first round of currency trading. Business hours in Tokyo start at midnight
GMT. Approximately 7.6% of Forex transactions go through Tokyo, meaning that the Asian session is the least active of the three major trading sessions. The most actively traded currency during this session is the Japanese yen.
European Trading Session
The European trading session starts at 8:00 am GMT. London is the main player in the Forex market, with over 32% of all Forex transactions taking place there. The London time zone is considered convenient as it overlaps with the time periods during which economies in both western and eastern hemispheres are active.
U.S. Trading Session
The American session opens with the start of New York business hours at 1:00 pm GMT. With 19% of all Forex transactions going through the Big Apple, New York is second to London in terms of trading volumes.
A trade day is similar to a regular day that you and I spend at work – meaning, we work, take a lunch break (and maybe a quick nap), come back to work, work a little bit more, and then go home. Simple as that!
A typical trade day includes a morning session and an afternoon session – and in between, an institutional lunch time (pardon the big words, but that is how they call the lunch break taken by big traders working at banks, hedge funds and other institutional asset managers).
The morning session is more active as it sees the release of major economic news, which tends to attract sophisticated investors and other major forex players. The afternoon session is more muted, volume-wise, and typically serves as a reflection time when investors analyze and re-analyze the effectiveness of their trading strategies, consolidate positions or exit long-held investments. Note, though, that in terms of trading volume, London leads the market with 35% of all forex transactions processed during a session, followed by New York (20%) and Tokyo (8%). The other 37% is scattered around financial centers as diverse as Shanghai, Rio de Janeiro, Chicago, Sydney and Hong Kong.
But a quick word of caution: as a retail investor, don’t engage in weekend trading, especially if you are a swing trader or day trader. Exit your positions on Friday afternoon before the New York session ends. If you are more of a long-term trader, tighten your stop loss and take profit. Every now and then, wide gaps occur in the market, that is, a currency pair’s opening quote on Sunday night is significantly different from its closing quote on Friday afternoon, New York time.
Weekend trading is more for sophisticated traders and institutional investors – and it often happens because a major event or transaction, say, a merger or acquisition, will take place the following Monday or week.