The ideal time to trade is when the FX (foreign currency) market is most active. During this period, spreads in trading (the difference between bid and ask prices) transform to narrow. In certain circumstances, the market makers that facilitate currency swaps receive less money, leaving more money in the coffers of the traders.
Four Major Foreign Exchanges
The 4 major FX exchanges are based in Tokyo, New York, London, and Sydney.
Forex traders should memorize their trading hours, giving specific attention to the time when two or more exchanges are trading at the same time.
Tip: When many exchanges are operating at a time, trading volume rises, as does volatility (the rate and amount at which share or currency prices vary). For forex traders, volatility may be helpful.
This may appear to be incompatible. In spite of everything, investors are scared of market volatility. Higher volatility, on the other hand, suggests more profit possibilities in the currency market.
Trading Hours on Forex Markets All Over the World
The foreign exchange market is entirely electronic, including Forex Time. Eastern Standard Time on Sunday until 5 p.m. Eastern Standard Time on Friday (EST). Every exchange has its exceptional trading hours from first day of the week, i.e., Monday, to Friday. The 4 most crucial time slots (all in EST) for the average trader are as follows:
- New York: 8 a.m. to 5 p.m.
- Tokyo: 7 p.m. to 4 a.m.
- London: 3 a.m. to 12 p.m. (noon)
- Sydney: 5 p.m. to 12 a.m. (midnight)
Despite the fact that each exchange is independent, they all deal in the same asset or currencies. As a result, when both exchanges are operating simultaneously, the traders’ quantity actively selling and buying a currency increases considerably. Bids and asks on one currency market exchange have an immediate impact on bids and requests on all other active exchanges. As demonstrated in the windows below, this reduces market spreads while raising volatility:
- 7 p.m. to 2 a.m., with Sydney and Tokyo exchanges open
- 8 a.m. to noon 5 p.m., with London and New York exchanges open
- 3 a.m. to 4 a.m., with London and Tokyo exchanges open
The New York’s exchange is particularly important for international investors. The US dollar, which accounts for 90% of global currency trade, is included in its transactions. The dollar’s swings might have a significant influence on markets all across the world.
The overlap of the New York and London markets from 8 a.m. to noon is normally the best trading hour. Both trading centers handle more than half of all FX transactions. On the other hand, trading on the Sydney and Singapore exchanges takes place mostly between 5 and 6 p.m., with substantially less activity than during the New York/London window.
Certain exceptions, and the trading volume, expected, is dependent on the assumption that no notable news will emerge. Military and political crises may considerably enhance volatility and trade activity during normally sluggish trading hours.
On a regular basis, some economic data has the ability to influence the market is disclosed. Unemployment, the Consumer Price Index (CPI), trade imbalances, consumer confidence, and consumer spending are all covered. You can better time your transactions if you know when this news will be revealed.
Trading Hours with a High Volume of Forex Can Be Risky
Forex traders must be cautious since currency trading can include high leverage ratios of 1,000 to 1.8:1. While this ratio offers appealing profit options and opportunities, it also puts an investor at risk of losing all of their money in a single deal.
Only 30% of forex traders (retail) can just break even or earn a profit, according to a Citibank report. Surprisingly, 84 percent of those polled believe they can profit from the foreign exchange market. The essential idea is that newly accompanied forex investors must open accounts with companies that provide demo accounts, which allow users to practice forex transactions and compute hypothetical earnings and losses. After investors have learnt the ropes and obtained enough expertise, they may safely begin actual forex trading.
While there are certain opportunities to make money, there is a lot of money to be lost either, as with many other investments. As a consequence, make learning more a priority.