Forex Trading Hours: Understanding The 24 Hour Market
Foreign exchange (forex) market ho urs are when traders and investors can trade in the foreign currency market. The FX market operates five days a week and closes on weekends.
These international currency exchanges are critical to supporting global trade. They include retail forex brokers and investors, as well as banks, commercial companies, central banks, investment management firms, and hedge funds. This article will focus on how you can use the 24-hour market on Dominion Markets to your advantage.
INTRODUCTION TO THE 24HR FOREX MARKET
Forex market hours are the times when forex traders from all over the world can buy, sell, swap, and speculate on global currencies. During the week, the FX market is open 24 hours a day. However, it closes on weekends.
Because this market works in various time zones, it is available at all times except on weekends. This break gets squeezed as time zones change.
The FX market starts in New York City on Sunday at 5 p.m. local time. It closes at 5 p.m. on Fridays and reopens 48 hours later to begin the new week. When the market is open, traders from all around the world can execute trades in the currency market. Trading conditions may differ depending on whatever session you are in.
THE FOUR MAJOR FOREX TRADING SESSIONS
ASIAN SESSION: OPPORTUNITIES AND CHALLENGES
The Asian session, which includes markets in Tokyo, Hong Kong, and Singapore, is among the most popular trading sessions. Trading forex Asian session pairings have advantages and disadvantages, which we shall discuss in detail below.
The strong liquidity during the Asian session is one of the major advantages of trading forex Asian session pairings. For a few hours, the Asian session overlaps with the European session, resulting in heightened trading activity. This heightened activity indicates more market participants, which means that trading volume is higher and spreads are tighter. The Asian session can be an excellent time to trade for traders who desire speedy executions and minimal transaction costs.
While trading in the Asian session has benefits, there are also downsides. The main drawback is that this session isn't as exciting as the European or American ones. It means there are smaller price changes. It can be challenging for traders who like big price swings. But remember, you can still make money with small price movements and strategies like range trading and breakout trading.
Furthermore, traders not in the Asian time zone may find it difficult to trade during the Asian session actively. The Asian session often begins at midnight GMT, which is problematic for traders in other areas of the world.
To take advantage of trading chances during this session, one may need to change one's sleep routine or use automated trading systems. The Asian session, on the other hand, maybe suited for traders who prefer a more relaxing and less frenetic trading environment.
EUROPEAN SESSION: THE HEART OF FOREX TRADING
Just before the Asian trading hours end, the European session keeps the currency market lively. To date, London has had the privilege of determining the parameters for the European session.
The trading hours are long because foreign capital markets, such as Germany and France, participate before the formal opening in the United Kingdom. Likewise, the session extends beyond the usual closing time due to persistent volatility. Consequently, European trading typically spans from 7 a.m. to 4 p.m. GMT.
NORTH AMERICAN SESSION: US INFLUENCE
When the North American session begins, the Asian markets have already been closed for many hours, while European traders are barely halfway through the day. Western session activities are primarily driven by the United States, with additional input from Canada, Mexico, and South American nations.
Consequently, New York City will exhibit the highest levels of volatility and engagement during this session, which continues until after the market closes.
Due to the early engagement in financial futures and commodity trading, along with the clustering of economic announcements, the informal start of North American trading hours occurs at noon GMT.
The Asian/European sessions sometimes overlap, resulting in increased volatility.
PACIFIC SESSION: A LOOK AT THE OCEANIA MARKETS
The Pacific session is the trading time in the currency market in the Asia-Pacific area, from Sydney to Tokyo. It usually runs between 3:00 PM and 10:00 PM GMT (8:00 AM to 3:00 PM EST).
The Pacific trading session is the most busy, contributing to more than 40% of daily trading activity. It overlaps with trading hours in Europe and North America, the world's two main currency markets.
The most actively traded currency pairs during the Pacific session are the AUD/USD, NZD/USD, USD/JPY, and USD/CNY. These currency pairs are popular due to their liquidity and substantial volatility.
The Pacific session is also an excellent period to trade developing market currencies like the Indonesian rupiah (IDR) and Thai baht (THB). These currencies are more volatile than mainstream currencies, but they also have the potential to give greater benefits.
WEEKEND TRADING AND GAPS: WHAT TO EXPECT
Forex trading is well-known for operating around the clock, following the business hours of the world's major financial cities. The forex market closes at the end of the New York trading session on Friday and reopens at the New York session on Monday.
Currency values are volatile during this period due to various causes, including emerging geopolitical events, newly revealed economic data, and other significant news that might influence markets. When trading resumes, a "gap" is said to have occurred if the opening price differs significantly from Friday's closing price.
The weekend gap trading approach has gained popularity among forex traders looking to profit from these price differences. The main premise of this strategy is the market's propensity to fill the gap, which means that the price will try to return to the Friday closing point. As a result, traders try to open positions as soon as the market opens on Sunday, hoping for a price reversal to close the gap.
TRADING STRATEGIES FOR EACH FOREX SESSION
Here are some strategies you can use on Dominion Markets for the various forex market sessions.
Asia/Pacific session (Tokyo session):
- Price action trading: Because it does not rely on indicators and you can utilize it in any market conditions, it is a popular approach for the Asia/Pacific session. Traders might search for critical level breakouts, such as support and resistance zones, or price reversals at key price points.
- Range trading is another popular approach for the Asia/Pacific session because the market is frequently range-bound during this time. Traders can look to buy at the bottom and sell at the top of the range or sell at the top and buy at the bottom.
- Trend trading is a strong approach for the London session because the market frequently trends during this time. Traders can use technical indicators to identify trends and then enter trades in the trend's direction.
- Day trading: Because there are so many trading chances throughout the London session, day trading is another popular approach. Day traders often enter and exit transactions on the same day and employ various tactics, including price action trading, trend trading, and scalping.
New York session
- Trend trading is a strong approach for the New York session because the market frequently trends during this time. Traders can use technical indicators to identify trends and then enter trades in the trend's direction.
- Position trading is another popular approach for the New York session, as traders can capitalize on longer-term trends. Position traders often hold their trades for several days or weeks and utilize technical and fundamental analysis to locate trading opportunities.
THE ROLE OF TIME ZONES IN FOREX TRADING
Because it is decentralized and operates across various time zones, the currency market is unusual. When one market closes, another one starts, allowing traders to engage at any time. London, New York, Tokyo, and Sydney are the key financial centers in the FX market. These centers' trading hours overlap, resulting in the most active trading sessions.
24 HOUR ACCESS: PROS AND CONS FOR TRADERS
Below are some advantages and disadvantages of having 24-hour access to the forex market on Dominion Market.
The advantages of having 24-hour access include trading at any time of the day. This accessibility also increases your chances of making a profit. 24-hour access means the forex market is highly liquid- there will always be buyers and sellers.
Some of the disadvantages of having 24-hour access include overtrading. Since the market is open throughout, you might make too many losses. The forex market is highly volatile, and as a result, it requires a lot of dedication to come up with a working strategy.
CONCLUSION: MAKING THE MOST OF FOREX CONTINUOUS HOURS
The forex market provides 24-hour access to traders, giving them enough time to profit from the market. However, it comes with numerous benefits and some demerits.
Now that you have understood the various market sessions, join Dominion Markets today and take advantage of the market sessions.