The forex market is open 24 hours a day from 5 p.m. EST on Sunday to 4 p.m. EST on Friday to allow for traders in different time zones around the world to buy and sell currency pairs.
In most domestic markets, currency exchanges are open for eight hours between 8:00 a.m. and 4 p.m., though this does not prevent participants from trading globally. As one market closes and another will open.
Where are the four major global trading sessions?
There are four major forex trading sessions across different time zones. They are located in London, New York, Sydney and Tokyo.
These markets represent the vast majority of global transactions in foreign currency pairs, and forex traders should remember when they open and close to benefit from higher trading volume and liquidity.
With the sun never setting on the forex market, trading is done virtually across different zones. When a trade is entered in New York, for example, it can be executed in several trading centers around the world.
When are the most important forex sessions?
For forex traders, the impost important trading sessions are:
London: 3 a.m. to 12 p.m. EST
New York: 8 a.m. to 5 p.m. EST
Sydney: 5 p.m. to 12 a.m. EST
Tokyo: 7 p.m. to 4 a.m. EST
These are optimal for traders because there is greater market activity and liquidity.
They are also generally thought to be the time when the difference between bid prices and ask prices narrow, giving traders the opportunity to make more money rather than when market makers benefit from higher spreads.
To put it simply: the higher the forex trading volume, the lower the broker transaction fees.
When is the forex market most active?
The most active trading period in the global forex market is when the New York and London sessions overlap. That is between 8 a.m. EST and 12 p.m. EST.
These markets are considered important because they account for a vast majority of all forex trades globally. During the time that they overlap, some estimates put the total amount of all trades conducted during those sessions at 70 percent globally. It is significant.
While New York and London represent the bulk of global currency transactions, there are other trading windows that traders participate in, though there is significantly less volume.
7 p.m. to 2 a.m. EST when Tokyo and Sydney exchanges are both open
3 a.m. to 4 a.m. EST when Tokyo and London exchanges are both open
What currency pairs benefit from overlapping trading hours?
The EUR/USD and the GBP/USD will likely be the most widely traded currency pairs when the London and New York exchanges are trading at the same time.
When the Tokyo session is on-going, the most active currency pairs will contain the JPY, alongside other Asia Pacific trading pairs like the AUD/USD.
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Where are the largest forex sessions?
As mentioned above, London and New York are the two largest currency markets. London accounts for roughly 43% of global trading, while New York is the second largest, and this is why forex market activity increases when they overlap on different sides of the Atlantic Ocean.
Tokyo is the third largest forex session, which isn’t surprising since the JPY is the third most traded currency in the world. Tokyo is also the first trading session to open in Asia, ahead of Hong Kong and Singapore.
Sydney is where the global forex market really gets going on at 5 p.m. EST on Sunday. As Sydney starts, there is more market activity as traders and financial institutions start their trading week after the weekend digesting the previous week.
What is the best time to trade forex?
In conclusion, it is important to consider what are the best times to trade in the 24-hour forex market session. Each forex trader will have a different strategy reflecting their interests, their location and their risk level but here are a few important things to keep in mind:
Remember that there is more more activity, more volume and lower spreads during overlapping forex trading sessions
Try to trade when more than one market is open – you will get better spreads
Trading volumes tend to decline on Friday as forex markets close for the weekend
Note down the different forex trading hours for each session, and, of course, when they overlap
With these tips in mind, the best trading session occurs when London and New York overlap from between 8 a.m. EST and 12 p.m. EST. That session has the most liquidity, the most activity and the tightest spreads.
Frequently Asked Questions
What times should you avoid trading?
Avoid trading when there is light liquidity and when there are no overlapping sessions. Here are times that you may want to avoid trading: the Sunday night session and Friday afternoon as traders end their week.
Also, immediately after the New York session closes, there is light liquidity with Chicago and some banks in LA remaining open a bit later. Sydney opens at 5 p.m. EST but it generally has lighter volumes.
Which day is the best for forex trading?
Traders should focus on the middle of the week – Tuesday, Wednesday and Thursday – when there seems to be increased trading volumes. Fridays can be busy but trading usually subsides after 12 p.m. EST until the close. Like most people, forex traders get excited about their weekends.
What forex trading session is open now?
Well that would depend on where you are located. Given that the forex market is open 24 hours a day, a trader will be able to enter an order from his or her computer that will be executed even if the domestic session in their country has ended.
Why do forex spreads widen at 10 pm GMT?
Forex spreads widen at this time because this coincides with the end of the New York trading session. As written above, when the major forex sessions are open, there is more liquidity and lower spreads.