SESSIONS

The Forex market is open 24 hours a day, five days a week, from Monday to Friday.
This is because the market operates in multiple time zones, stretching from Sydney
and Tokyo in the East to San Francisco in the West. As one part of the world goes to
sleep, another wakes up, which is why we talk about Forex market hours and trading
sessions. The Forex market has no rigid trading hours, but seasoned traders know
that there is an unofficial concept of Forex market hours.

The trading day starts at 7:00 am in Sydney, Australia, at the Australian Eastern
Standard Time (AEST) zone, which is 10 hours ahead of the Greenwich Mean Time
(GMT) or GMT +10, and ends at 5:00 p.m. in New York, the United States, at the
Eastern Standard Time (EST) zone, which is 5 hours behind the Greenwich Mean
Time (GMT) or GMT -5.

So basically there are 3 main sessions:

1. Asian Session: This session starts at 12:00 AM GMT and ends at 9:00 AM
GMT. It is also known as the Tokyo Session. The Asian session is
characterized by low volatility and low liquidity, with the Japanese yen being
the most actively traded currency.
2. European Session: This session starts at 7:00 AM GMT and ends at 4:00 PM
GMT. It is also known as the London Session. The European session is
characterized by moderate volatility and high liquidity, with the euro being the
most actively traded currency.
3. North American Session: This session starts at 12:00 PM GMT and ends at
9:00 PM GMT. It is also known as the New York Session. The North American
 session is characterized by high volatility and high liquidity, with the US dollar
being the most actively traded currency.

The global currency market is dominated by large banks, commercial companies,

central banks, hedge funds, and retail forex traders. When a deal is made between
two parties in different countries, the payment is usually settled in the currency of
the seller’s country. For example, if an Australian car dealer wants to import 200
units of Mitsubishi’s latest Sports Utility Vehicles (SUVs) from Japan, they will need
to pay in Japanese yen. As soon as the banks open in Tokyo, the Australian importer
will need to convert its Australian Dollars to Japanese Yen in order to pay for the cars
to the Japanese car manufacturer. This sudden demand for Japanese Yen will
increase its value, which will turn the AUD/JPY bearish.

This is just a simple example, but it illustrates how international transactions can
affect the value of currencies. When banks in different countries are open to
conducting international transactions, there is a high probability that the respective
currencies will experience increased trading volume, leading to fluctuations in their
prices.

In theory, the Forex market is open 24/7, and anyone can buy and sell currencies at
any time. However, to trade a Forex pair, you need a counterparty. This means that if
you want to buy USD/JPY in the middle of the night when nobody in the United
States or Japan is awake, you may have a hard time finding someone to sell it to you.
Therefore, it is advisable to trade during active trading hours when there are active
buyers and sellers in the market.

Although some brokers allow trading during the weekends, the prices of various
currency pairs hardly move on Saturday and Sunday. If you are a short-term day
trader who opens and closes trades within a day, trading outside banking hours in
major financial centers around the world will also feel like you are trading during the
weekend. This is because if major financial institutions and professional traders are
not placing huge orders that move the market, there is no reason for solid trends to
take place.

Therefore, the concept of Forex Market Hours is based on the idea that when major
financial markets are open in a given time zone, the volume and liquidity in the
market remains high. This, in turn, reduces the difference between the bid and ask
prices and helps traders to fill their orders relatively easily without incurring slippage.

In technical terms, exchanging 200 U.S. Dollars for British Pounds at an airport
foreign exchange kiosk in London would be considered a foreign exchange trade.
However, large cross-border transactions worth billions of dollars do not occur at 3
a.m. in the parking lot of Heathrow Airport. These transactions take place among
large banks during their respective banking hours.

It is important to note that not all branches of a bank will engage in large-scale
cross-border transactions. For instance, a small branch of Bank of America in
Louisville, Kentucky, is unlikely to engage in such deals, while its downtown
Manhattan branch in New York will certainly do so. Similarly, a branch of UBS Group
AG in Bangkok will have a lower transaction volume in the Forex market compared to
its branch located in a major Asian financial hub like Singapore.

Therefore, banking hours in the time zone of major financial centers like Tokyo in
Japan, Singapore City in Singapore, Frankfurt in Germany, London in the United
Kingdom, and New York in the United States generate the bulk of the trading volume
in the Forex market. As a result, liquidity and volatility are usually higher when
markets are open in these time zones.

Apart from banks that engage in cross-border currency transactions, institutional

investors and hedge funds that speculate in international stock exchanges also
generate a significant volume of foreign exchange transactions. Hedge funds with
global exposure often trade a large number of stocks worldwide to diversify their
portfolios.

Interestingly, some of the major forex exchange hubs also host the major stock
exchanges. For instance, the NASDAQ and the New York Stock Exchange are both
located in New York; the London Stock Exchange is situated in London, and the
Tokyo Shoken Torihikijo is based in Tokyo.

Therefore, cross-border investments that require moving funds from one end of the
globe to another generally contribute to a higher level of trading volume in the global
foreign exchange market. Moreover, when banks and stock exchanges in more than
one major financial center are open simultaneously, the trading volume and liquidity
increase substantially.

The start of the New York trading session has typically generated the majority of
trading opportunities for short-term traders because it opens when the London
trading session is also open across the Atlantic. Therefore, if you overlay the trading
volatility in a forex market hours chart, you can observe that it spikes up when
trading begins in the financial center located next in the time zone.

Consequently, the overlapping hours of the London trading session and the New York
trading session are the best times to trade forex since the market is most active.

Please note that the forex market is open 24 hours a day during weekdays, but the
market is closed on weekends. Knowing the forex market’s operating hours is
essential for a trader.

You need to know when the forex market opens and closes as well as the four main
trading sessions: the Sydney session, the Tokyo session, the London session, and
the New York session. The Forex Market Time Zone Converter tool can help you view
the open and close times of the main forex trading sessions in your own local time
zone.

If you are a swing trader or a trend trader who prefers to keep positions open
overnight or for several days, then paying attention to the forex market hours chart in
figure 2 may not be that important. However, most Forex traders are day traders, and
different trading sessions based on the time zone and geographic location of the
financial centers around the world will have a substantial impact on the bottom line.

While your actual trading strategy may not change, knowing when to trade can
certainly help you stop wasting time looking for trades when there are no trading
opportunities in the market. Furthermore, success in Forex trading highly depends on
timing, as trends can often reverse and wipe out the profits in your open trades.
Knowing when to enter and exit the market based on active Forex market hours can
have an immensely positive impact on your profitability and aid in building the
confidence you need to succeed in this agile market environment.

Here are three major Forex market hour-based strategies you can apply today to
improve your win rate and increase profitability:

1. London Breakout Strategy: This strategy involves trading during the opening
hours of the London trading session, which is known to be the most volatile
session of the day.
2. New York Breakout Strategy: This strategy involves trading during the
opening hours of the New York trading session, which is also known to be
highly volatile.
3. Tokyo Channel Breakout Strategy: This strategy involves trading during the
opening hours of the Tokyo trading session, which is known to be the least
volatile session of the day.

Also note that the Forex market is open 24 hours a day during weekdays, but the
market is closed on weekends. Knowing the Forex market’s operating hours is
essential for a trader. You need to know when the Forex market opens and closes as
well as the four main trading sessions: the Sydney session, the Tokyo session, the
London session, and the New York session. The Forex Market Time Zone Converter
tool can help you view the open and close times of the main Forex trading sessions
in your own local time zone.

If you are interested in learning more about

● how ‘market makers’ influence the market
● which strategies to use to benefit from sessions
● SMC and its tools

Check our E-Book