Once a person decides to start forex trading, one of the first things for him to understand is about the forex market hours. They are usually sold on the news that the forex market is open 24×5 which means that they can make money throughout the day but nothing can be further from the truth.
It is indeed a fact that the forex market is open 24×5 but that does not mean that the market is active and volatile all the time which means that most of the time, it is not possible to trade during certain periods of the day. If a new trader does seek to try his hand at these times, it is likely that he will end up in losses as the market is likely to be illiquid at certain times. That is why it is important for new traders to ask themselves the question of what time does the forex market opens and when to sit out the market so that they can plan their trades accordingly.
Forex Trading Sessions
The forex market opens every Sunday at 5 PM EST and closes on Fridays at 5 PM EST and it is open at all times in between. The forex market is divided into mainly 4 trading sessions which are the London session, New York session, Tokyo session, and Sydney session. Many traders usually reduce this to 3 trading sessions as Asian, European, and US sessions. It is a matter of personal choice but the more important thing is to have a good grasp of these timings.
Best Time to Trade Forex
Generally, there is a correlation between the FX pairs and the sessions. The London, New York, and the overlapping times between these 2 sessions are generally the time when almost all the FX pairs are actively traded, liquid and volatile. But there are also situations where the Asian currencies are more volatile during the Asian session, the European currencies like EUR and GBP are more volatile during the London session and the dollar is highly active during the New York session. Some traders generally manage their trading by using a forex market hours chart which divides their chart by the session timings and for those traders whose trading strategy revolves around open and close of trading sessions, such charts would be very important.
The best time to trade depends on the pair that a trader generally trades but as a rule of thumb, the market is liquid and volatile starting from the London session and the overlapping session between London and New York is when the liquidity is highest as both the New York and London exchanges are both open and hence easy to trade. But of course, if a trader purely focuses on the Australian dollar, then it may be a better idea to focus on trading during the Asian session. New traders generally have a tendency to start trading immediately when the forex market opens during a week but they need to avoid that impulse and wait for the right moment to trade.
The timings of the sessions must be strictly kept in mind by the trader so that he doesn’t get trapped during times of low liquidity and has to then deal with a market that doesn’t move. He also has to remember the timings of the various forex market sessions so that he understands when to move in for a trade and when to stay put and bide his time. The forex market opening hours are generally busy but they are also the time when the market is not very liquid and so it is advisable for traders to stay away during these times unless they are caught in a position from the previous week which they want to exit immediately.
Another point to note here is that we have specified all the timings in EST but the trader might be living in any part of the world. It is better for traders to have a forex market time converter at least when they start out their trading so that they know, in their own time zones, when the forex market is closed and when it opens and can plan their trades accordingly.
Does the Forex Market Close?
A misconception that new traders generally have is that the market is always open throughout the week but that isn’t right. Though efforts are being made in certain platforms to have the forex market open 24×7, officially as yet, the market is open only 24×7 with the market being closed on Saturday and most of Sunday as well. This gives some much-needed rest for the market participants to plan for the week ahead. It may also be a good idea to use live market hours monitor so that the traders are aware of when the market opens, closes, and what session they are in so that they can plan their trading accordingly.
Spot gold and silver contracts generally start their trading session every week an hour after the FX market opens and this also has to be kept in mind by the trader as they shouldn’t be misguided by the ads that the market is around the clock. Once you are confident of these session timings, you can trade with confidence as the forex market is suitable for all investors.