Forex Trading Hours and Sessions
Forex is a unique market because of its high liquidity, and size and because it is traded 24 hours a day 5 days a week. Because of that, traders can trade at any time of the day that suits them and their schedule. It doesn’t matter if you are an early bird or you like to stay long awake during the night. One thing is sure; the forex market will always be open. Just not at weekends.
But there is a little catch.
Although we can trade at any time we want, there are certain nuances and characteristics for different times of day. For example as we travel from Asia to Europe, we need to know what time is there and how many hours we have to add or subtract on our watches. To not cause any confusion, all the times that we will mention in this video, we are going to base on London time with GMT+0.
Every week on Sunday, the Forex market opens at 9 PM GMT, which makes the start of the Sydney session. Two hours later, the Tokyo session starts at 11 PM. To ease things up, we can merge these together and call them an Asian session (sometimes called Tokyo session). Asian session ends at 8 AM. In Europe, we have Frankfurt and London sessions with Frankfurt starting at 7 AM and London starting at 8 AM. But once again to make things easier, we will call it a European session (sometimes called the London session). At 12 PM North American session (sometimes called the New York session) starts and it goes alongside the European session until 4 PM. This is called the European/North American overlap, and it usually brings a lot of trading opportunities as there is the highest volume traded during those hours. After London closes at 4 PM, the New York runs till 9 PM, and once it is completed, the Asian session starts again and the whole cycle repeats. As time changes during the year, there are also slight changes to trading hours, so we should always keep up with what’s happening.
The Asian session has the lowest volume of the three trading sessions. But this doesn’t mean that we cannot find any opportunities there. Besides traders that live in Asia, this trading session can also attract European traders who like to trade during the night or Americans that just got home from work and want to spend late afternoon trading. The Asian session is mostly controlled by the Japanese economy, the third biggest globally. The Japanese yen is the third most traded currency, with around 20% of all transactions. During the Asian session, around 20% of the daily volume is traded. Besides Japan, we have countries such as Singapore, New Zealand and Australia which participate in the market. Because of that, currency pairs such as AUDJPY, AUDNZD or NZDJPY are the best ones to trade. Macroeconomic releases from New Zealand, Australia and Japan also cause high volatility, which every trader should pay attention to.
European session (London)
London was always one of the most important business centres globally due to its strategic place between Europe and America. Nowadays, London is one of the leading financial hubs in the world. That’s why the European session is called the London session because the city accounts for the majority of total business volume. The European session makes up over 30% of traded volume alone at the Forex market. One of the key reasons to trade during the European session is that we can trade both European and American macroeconomics releases, which bring significant volatility to the markets. Thanks to high liquidity, traders can benefit from very low spreads optimal for scalpers and day traders. Since the European session is the first high liquid session of the day, many new trends are forming during the London open. Markets usually move right after the open and slow down during the London lunch hours as large participants take small breaks before New York kicks in. During the European session, not only are major currencies moving, but we often see high volatility in minors as well. The currency pair EURGBP, and GBPJPY are extremely popular crosses that offer high volatility and plenty of trading opportunities.
North American session (New York)
The North American session is the last trading session for the given day. North American session is sometimes called New York because of the city’s importance as the world’s financial hub. Because over 80% of the traded volume involves the US dollar, there is no wonder that the North American session brings a significant amount of volatility every day. Also, most of the key fundamental events happen during the North American session. Namely, these can be the non-farm payrolls – NFP, Federal Open Market Committee – FOMC, unemployment rates or consumer price index – CPI. North American session slows down around London close at 4 PM, but we can find opportunities in the market even after that. Although money usually flows to the US index market once the European session is finished, such as S&P500, Dow Jones or Nasdaq. Same as the European session, the North American session offers tight spreads and the right conditions for intraday trading.
Days of the week
Now that we covered separate sessions let’s look at different days of the week. Markets open on Sunday evening London time, but there is usually a minimal volume during that time. Monday morning also tends to be slow until the North American session starts and markets really start to pick up. Tuesday usually offers double the volatility of Monday, and it makes it one of the best days to trade during the week, with Wednesday and Thursday. Fridays are interesting days as they have lower volumes, but there are many macroeconomic events during Friday. For example, NFP, which is every first Friday of the month, can offer many opportunities, but some traders prefer to skip those entirely, as markets tend to be less predictable during these events. After London closes on Friday, volumes usually dry up.
Trading hours of CFDs
Besides currency pairs, many brokers offer CFDs for indices and commodities to trade as well. For equity indices, they differ based on the country they are from. European indices such as DAX or Stoxx open at 1 AM and trade until 10 PM London time. US indices such as SP500, Nasdaq or Dow Jones trade 23 hours a day with a break between 10 PM and 11 PM. But for US indices, we have something that is called a pit session. The name of pit sessions comes from trading pits, representing the time period from 2:30 PM till market close. These are hours when US traders are awake, bringing large amounts of volumes to the market. Commodities such as crude oil and gold trade 23 hours a day with the highest volume during the North American session due to trading in the futures market.