Currencies are traded around the globe, which means forex traders can have a 24-hour cycle. During each trading session, the major financial hub in a given region obtains the session title during business hours. And that’s how it goes, from one region to another following opening hours in all the time zones. To juggle these different session times, it is important to understand which currencies are most liquid during each of them.
The intricate global network of exchanges and brokers across time zones makes the international currency market. Therefore forex trading hours are regulated by the business hours of every participating country or region.
The Major Trading Sessions:
- New York
The Minor Trading Sessions:
- Hong Kong
- Wellington / Auckland
There are always certain times where the market is more active, so as you plan your moves, it is good to keep track of these pointers. The 24-hour open market characteristic is an advantage. It safeguards the liquidity and offers continuous opportunities for profit. That does not mean it is risk-proof or that there are no pitfalls. Many-a-thing can occur when the trader is not available. From volatility jumps to missed opportunities. Therefore, planning, careful observation, and tactics are crucial in setting beneficial trades. In particular, when trading a different time zone than the one you are in, using tools and automation to set rules is a great way to stay in control of your trades at all times.
There are three main sessions of peak activity. These are identified as the Asian, European, and North American markets. In the trader’s lingo, they are known as Tokyo, London, and New York sessions. And these represent the regional financial hubs.
The Tokyo Session
Liquidity fluctuates between the weekend and weekdays. The Asian market is the first one to open. So the first forex market trading hours begin there. From 00:00 GMT to 06:00 GMT a lot of countries from the region are active, including Australia, China, and Russia. Thus, it makes sense that this session stretches beyond the regular Tokyo market hours. In order to cover activities in these various markets, the official hours are considered between 23:00 GMT and 08:00 GMT.
The London Session
Just as the Asian markets come to a close, the European session kicks off. The currency market in this time zone is quite intense and includes many big financial hubs. However, London is the regional representative. And official business hours are enlarged to 07:00 GMT – 16:00 GMT to cover all capitals.
The New York Session
Halfway through the day for European traders, the North American session goes online. And it is during this time overlap that the western forex market is influenced mainly by US activities. The New York session stretches from 12:00 GMT to 20:00 GMT.
Times of Increased Risk
Typically, periods of low liquidity at the start of a session is considered the riskiest time to trade. This brings on higher volatility which is not characteristic of normal trading hours. Anywhere between 12:00 AM GMT and 02:00 AM GMT is a potential high-risk time. The factors that influence this include:
- Volatility that can hit your stop loss
- Low liquidity that can impact large transactions
- Wider spreads
Times of Increased Opportunities
While there are bad times to trade, there are also good times. Opportunities are more likely to be found during the first three hours of a session. Also, the Top of the Hour, which is the first and last five minutes of every hour, brings activity spikes to look out for.
A Trading Style for Every Time Zone
Ultimately, with the varying business hours, overlapping activity time, and tricky considerations for every time zone, the best strategy is adaptation. And that is adapting your trading style to match the level of liquidity, the spreads, the momentum of every region. Otherwise, you can also choose to trade the currencies that fit your tactics. It has a lot to do with observation, planning, and trying to avoid common pitfalls. We leave you with the recommendation to always start by practicing and trying your strategies on a demo account.
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