Introduction
If you find yourself bored on Sunday, you can always follow live Forex market prices. Just make sure it’s after 5 p.m. EST! The Forex market hours are not exactly 24/7 but rather 24/5. Do you know why? Understanding Forex market hours will help you establish an effective trading routine as well as identify windows of opportunity and avoid unnecessary volatility or risk.
Highlights and Key Takeaways
- You may trade Forex 24/5 from Sunday 5 p.m. EST until Friday 5 p.m. EST.
- One of the optimal times to trade is during the overlap of the London and New York sessions due to higher liquidity.
- Holidays in the United States or the United Kingdom can decrease trading volume and increase costs.
- Traders should be cautious when executing operations before the weekend as there may be significant gaps or volatility.
Understanding Forex Market Hours
You can find the Forex market open from Sunday 5 p.m. EST until Friday 5 p.m. EST. Within these days, the market remains open 24 hours a day for the entire 5 days. Central banks, investment banks, traditional banks, institutions, and corporations, as well as retail investors, operate in the market across different time zones and exchanges.
In forex trading, international sessions occur continuously in the world’s major financial centers: Sydney, Tokyo, London, and New York. When one market closes, another one opens, and there are times when they overlap, which increases market volume. This is vital to global commerce, supporting banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers.
Specific Sessions and High-Volume Hours
The specific forex market hours for each of the major financial centers are:
- Sydney: 5 p.m. to 2 a.m. EST
- Tokyo: 7 p.m. to 4 a.m. EST
- London: 3 a.m. to 12 p.m. EST
- New York: 8 a.m. to 5 p.m. EST
The markets with the highest trading volume are London and New York, and as you can see, there is an overlap between 8 a.m. EST and 12 p.m. EST. This means that the largest amount of trading activity occurs during this time frame. Therefore, there is also a benchmarking process for spot prices and forward exchange rates occurring when the London and New York sessions overlap, which then continues during the forex session times of Sydney and Tokyo.
As a result of lower trading volume, prices during the Sydney and Tokyo sessions can be more volatile than in other time frames. You should always take these factors into account when trading because spreads can be more significant.
Most Popular Currencies and High-volume
The currencies with the highest international trading volumes are:
- United States Dollar (USD)
- Euro (EUR)
- Japanese Yen (JPY)
- British Pound Sterling (GBP)
- Australian Dollar (AUD)
- Canadian Dollar (CAD)
- Swiss Franc (CHF)
An important aspect to consider is that the higher the trading volume, the more efficient the markets are in assigning prices to currencies. In other words, spreads are narrower, which reduces trading costs. For this reason, institutional traders choose to trade during overlapping hours, when there’s higher trading volume.
Market liquidity is crucial as it allows for easier execution of trades at a specified price. In this regard, it’s worth noting that liquidity also varies among currency pairs. By definition, the EUR/USD pair has the highest trading volume.
What Are the Best Times to Trade Forex?
The best time to trade forex is the one that aligns best with your personal schedule while minimizing costs in the market. As we’ve seen, higher trading volumes lead to lower spreads and trading costs. Throughout the day, volatility fluctuates along with trading volume depending on each session and daily events. One of the optimal times to execute your trades is during the overlap of the London and New York sessions, as you’ll be reducing the spreads compared to, for instance, the Sydney hours.
The Asian session may be less volatile, but it can still offer good opportunities as events affecting the markets can also take place during these hours. Lastly, and again, remember to align your trading strategies with your personal schedule to enhance the efficiency of your trading operations.
Factors Affecting Forex Market Hours
There are multiple factors that affect international trading sessions. For example, holidays in the United States or the United Kingdom can decrease trading volume. The same applies to daylight saving time changes, which alter overlap hours.
Additionally, throughout the month there are important data releases and decisions made by governments or central banks. These reports and pieces of information increase trading volume and volatility during international sessions. In other words, there can be changes in typical behavior depending on events in the economic calendar or unexpected occurrences.
As a result, it’s essential to stay informed about schedule changes or unexpected disruptions that can increase uncertainty and volatility during trading sessions. To avoid these issues, you can adjust your strategy and reduce your overall exposure in the days leading up to significant news events such as FOMC interest rate decisions or the release of inflation data.
What Are Weekend Gaps in Forex?
Weekend gaps in the forex market are the price differences that occur between Friday’s closing prices and Sunday’s opening prices. These gaps occur due to news, events, or changes in market expectations that may have occurred over the weekend. These gaps can be classified into two broad categories:
- Common gaps occur due to minor changes in expectations and normal market conditions. These are small jumps in prices, often followed by a trend similar to the previous one in prices.
- Breakaway gaps mark the end of a previous trend, creating aggressive movements, and are often accompanied by high trading volume.
Most gaps that occur are common gaps since not every weekend brings significant news that shakes the markets aggressively. However, at times, countries and central banks can make decisions that impact their currencies.
A clear example of this happened on March 21, 2021, when the President of Turkey, Tayyip Erdogan, removed the head of the country’s central bank over the weekend. This caused a 15% depreciation of the Turkish Lira compared to the US dollar from Friday to Monday. This illustrates how unexpected political or economic events over the weekend can lead to substantial gaps in the forex market, which means it’s necessary for traders to be cautious when trading around the weekend and manage their risk properly.
How to Use Weekend Gaps in Forex Trading to Your Advantage
Naturally, just as weekend gaps pose a potential risk, they can also present an opportunity. Price differences that occur between Friday and Sunday can, for example, have a political or economic origin based on electoral expectations. Take the case of the USD/BRL pair, as Latin American countries often have a strong political component. If we are interested in using the weekend gap to our advantage, we could infer which candidate might win the elections and place a buy or sell order depending on the market’s favorability toward each candidate.
Regardless of the strategy you use, the implementation of pending orders is essential to mitigate the risk associated with weekend gaps. In other words, it’s necessary to have a clear strategy with well-defined stop-losses or take-profits before placing your trade.
Bottom Line
Having a comprehensive understanding of forex market hours and international sessions is essential for identifying moments of opportunity and mitigating the risk associated with higher volatility. Despite the forex market operating 24/5, it’s crucial to consider the unique characteristics of each session. For example, whether there will be significant news releases during the day or if the government will make an important decision over the weekend. Lastly, don’t forget to align your trading strategy with the hours that best suit you and your risk tolerance.
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FAQs
Can I Trade Forex on Weekends?
The forex market is open from Sunday 5 p.m. EST until Friday 5 p.m. EST. Depending on your time zone, you may have a limited portion of the weekend available for forex trading.
Why Does the Forex Market Operate 24 Hours a Day?
In Forex trading, international sessions occur continuously across the globe’s key financial hubs, including Sydney, Tokyo, London, and New York. As one market concludes its session, another one initiates, with instances of overlap in their operational hours.
Is There a Best Time to Trade Forex for Beginners?
The optimal time for forex trading is the one that best matches your personal schedule while also minimizing market costs. However, executing your trades during the overlap of the London and New York sessions is considered one of the prime times, as it leads to reduced spreads and more volume.
Do All Currency Pairs Have the Same Trading Hours?
The activity levels of currency pairs fluctuate during the trading day, depending on the market that is open at each particular moment.
Can I Trade Forex at Night?
As long as you want to trade from Sunday 5 p.m. EST until Friday 5 p.m. EST, you can trade at any moment. However, costs might be higher due to the lower volume in the markets.
