The foreign exchange market is full of opportunities and challenges, with countless individuals eager to earn substantial returns from forex trading. As a beginner, understanding the opening hours of the forex market is the first step in getting started. This article will provide a detailed overview of the forex market's opening hours. Read on to embark on your journey into the world of forex!

Why does the forex market trade 24 hours a day, five days a week？

The forex market refers to the place or trading network where currency exchange and forex trading take place, consisting of participants from both the supply and demand sides, as well as forex intermediaries. The form of the forex market includes tangible markets similar to stock exchanges and intangible markets formed by modern communication tools such as telephone, telegraph, trading networks, and the internet. However, unlike markets such as stocks and bonds, forex trading has a distinct feature – it is open 24 hours a day. The reasons behind this can be explained from two perspectives.

From the perspective of forex market participants, international banks constitute the largest volume in forex trading. As the main players in forex trading, international banks engage in various aspects of forex trading, such as adjusting their own positions, meeting customer-related demands, utilizing arbitrage opportunities for legitimate profits, and executing national policies. As long as it is a working day, the demand from banks is continuous. Due to the time zone differences between banks in different countries, their trading needs vary. To ensure the smooth operation of forex business for banks worldwide, the forex market must remain open 24 hours a day.

From the perspective of the forex market itself, the essence of forex trading is the exchange of different currencies. This characteristic determines that the forex market is an international market rather than a market within a specific country or region. Currently, there are approximately more than thirty forex trading markets worldwide, located in different countries and regions across major continents. The trading times of these markets overlap and connect with each other, allowing for smooth transactions. Thanks to the development of modern communication infrastructure and technology, the markets are interconnected, creating a continuous market that operates 24 hours a day from Monday to Friday, except for major holidays. This continuous operation without day or night distinctions provides investors with an investment venue free from time and space constraints.

With the condition of the forex market being open 24 hours a day, banks from various countries and regions can execute forex-related functions, ensuring the smooth operation of economies. Ordinary traders with forex investment needs also enjoy greater trading flexibility, allowing them to formulate more advantageous trading strategies based on their needs and daily schedules. Furthermore, currencies from various countries and regions have the opportunity to be traded, achieving international integration of currencies.

4 Major Forex Trading Sessions

The foreign exchange market is divided into four major trading sessions: Sydney session, Tokyo session, London session, and New York session. They open at different times during the day.

Using Greenwich Mean Time (GMT) as a reference, the opening times for each trading session are as follows (both during standard time and daylight saving time):

Standard Time

Daylight Saving Time

In theory, the foreign exchange market indeed lacks a central exchange, allowing individuals to buy or sell currencies at any time during the day or any day of the week. However, to trade forex currency pairs, you need a counterparty. To make a purchase, you need someone else to sell what you want to buy, and vice versa. Therefore, if you are not aware of the active times for each currency, you may struggle to execute trades smoothly. For instance, attempting to buy USD/JPY in the middle of the night when the United States or Japan is dormant might result in your order not being executed or being filled with significant slippage, significantly increasing your trading costs.

As a retail forex trader with limited capital, you have no control over the market. You will rely on larger participants such as banks and institutional investors to create trends and hope to capitalize on some of these trends. This is why short-term retail forex traders should only engage in trading during active banking hours and avoid seeking trading opportunities when the forex market is at a standstill.

In practice, you should choose trading sessions that align with the currency pairs you are trading. The following will outline the differences in terms of volume, volatility, and active currency pairs during four distinct trading sessions.

Sydney Trading Session

Traditionally, the international date line marks the start of a new calendar day, and with New Zealand being a major financial center, the forex market opens here on Monday morning while it is still Sunday in most parts of the world. Despite being potentially the smallest market compared to others, the Sydney trading session often experiences relatively high volatility, especially after the weekend pause. It is advisable to consider trading the Australian Dollar (AUD) and New Zealand Dollar (NZD) during the Sydney session.

Tokyo Trading Session

This trading session, also known as the Asian session, is characterized by relatively slow price movements. During this time, most trading platforms regularly widen their spreads. The market during this phase is often overlooked by retail forex traders seeking volatility arbitrage due to increased costs and lower liquidity and volatility. However, the lower volatility makes predicting price movements during this period relatively easier. Consider trading currency crosses involving the Japanese Yen (JPY), Australian Dollar (AUD), Singapore Dollar (SGD), and New Zealand Dollar (NZD) as they tend to be relatively active during the Asian session.

London Trading Session

Among all existing trading sessions, this is the period with the highest volatility, the largest trading volume, and the fastest price movements. The trading volume during this session constitutes over 35% of the total daily trading volume. The market volatility during the London session can work either in your favor or against you. It becomes relatively challenging to establish positions when prices are rapidly changing, making certain predictions difficult. Trends sometimes reverse as the London or European session concludes, as European traders lock in some of their profits.

However, if your trend analysis is accurate, you may appreciate the volatility during this specific period. Due to high liquidity and volatility, you can trade almost any currency pair during this session. The most actively traded currency pairs during this period include Euro/US Dollar (EUR/USD), British Pound/US Dollar (GBP/USD), US Dollar/Swiss Franc (USD/CHF), US Dollar/Japanese Yen (USD/JPY), Euro/Japanese Yen (EUR/JPY), and British Pound/Japanese Yen (GBP/JPY).

New York Trading Session

New York is the central city for the US trading session, accounting for approximately 15% of the total daily forex trading volume worldwide. The New York trading session begins after the opening of the New York Stock Exchange. This session's market is primarily driven by the activities in the United States and contributions from Mexico, Canada, and other South American countries. The volatility in the New York forex market is second only to the London session, and the major currencies traded during this period include the British Pound, Euro, Australian Dollar, and US Dollar.

As the US Dollar is involved in about 85% of forex trades, the New York trading session is highly significant, as most of the Dollar's fluctuations occur during the US trading hours. Major economic reports and data are released during the US trading session, often causing significant fluctuations in the US Dollar. Towards the end of the New York market, as the Sydney trading session joins, trading volume gradually diminishes, and price volatility significantly decreases.

FAQs

What is the best time for forex trading？

The optimal trading time depends on your individual trading strategy and style. The overlapping periods of the London and New York trading sessions typically witness the highest trading volume, thus often presenting more trading opportunities.

What factors influence the forex market？

The forex market is influenced by factors such as economic data, central bank announcements, and political uncertainty. When engaging in forex trading, it's essential to remember that you are speculating on two currencies, requiring monitoring of market trends in each country/region. Forex trading becomes more expansive around events related to these factors.

Is Friday a good day for trading forex？

In general, the first half of Friday sees active trading, providing favorable conditions for trading. However, as the weekend approaches, trading volume significantly decreases in the latter half of the day. Traders should try to avoid trading on Friday afternoons. Additionally, many traders tend to close positions early to mitigate weekend risks, as weekly trends may undergo a shift in direction.

Are there certain months more favorable for forex trading？

During the period from September to December, forex trading often experiences increased volatility due to major financial reports being released and the conclusion of many fiscal years. However, during the summer months (June to August), trading volume typically decreases due to holidays in many countries, making market trends harder to predict.

Bottom Line

In the journey of forex trading, time unfolds with the dawn in Sydney, traverses the tranquility of Tokyo, rushes towards the vibrancy of London, and finally descends into the nightfall of New York. This endless cycle allows global traders to chase opportunities in the ripples of the market. The choice of trading sessions, like wielding the brush of time, paints the strategies and wisdom of traders. In this 24-hour, ever-awake market, traders should comprehend the characteristics of each major time segment, grasp the pulse of the market, and compose their own wealth anthem.