The worldwide forex markets are attractive to many traders because one can trade 24 hours per day, five days per week. Unlike other financial markets which operate during standard business hours, the currency market operates for normal business hours for four different sections of the globe. Many beginning traders become overly aggressive and watch numerous economic calenders while trading on every economic data release and event. However, this strategy can be risky since it can cause a trader to burn out while also quickly depleting his or her forex account funds.
More Activity Means More Opportunity
Forex traders may want to decide on the best trading hours which will provide the most opportunity. Generally, the more activity there is in the currency markets the more opportunities for traders. Usually the most active times are when the various global market hours overlap. Markets tend to stay in a tight price range of approximately 30 pips when only one currency market is open.
New York Market Session
The New York session is the largest currency market in the world and is watched carefully by many foreign investors since 90 percent of all forex trades involve the U.S. dollar. The New York session correlates with the New York Stock Exchange (NYSE) trading hours, 8 a.m. to 5 p.m. (EST). Movements in the NYSE have the potential to immediately and significantly affect the price of the U.S. dollar.
Tokyo Market Session
The Tokyo market, the first trading center to establish itself in Asia, opens at 7 p.m. (EST) and closes at 4 a.m. (EST). This market session has the largest amount of trading in Asia and is just before sessions in Singapore and Hong Kong. The USD/JPY is particularly active during this trading session when only the Tokyo market is open due to the importance of the Bank of Japan for market movements.
Sydney Market Session
Sydney is the smallest out of all of the major markets, however it still provides significant opportunities. This market experiences much of the initial action Sunday afternoon when markets reopen. The Sydney market operates from 5 p.m. to 2 a.m. (EST).
London Market Session
The United Kingdom is known to dominate financial markets around the world. London is the country’s main component and accounts for approximately 34 percent of all trading in global financial markets. Currency pairs involving the GBP tend to see the most action during this time due to the influence of the Bank of England. The London market session runs from 3 a.m. to 12 p.m. (EST).
After understanding when exactly each individual market trades, a trader can then determine when more than one market overlaps in order to pinpoint the busiest forex market times. The most active overlap is from 8 a.m. to 12 p.m. (EST) when New York and London markets overlap. Tokyo overlaps with Sydney from 2 a.m. to 4 a.m. (EST) and with London from 3 a.m. to 4 a.m. (EST). Which times a trader decides to trade will depend upon his or her availability to watch the markets and the trader’s specific trading style and strategy.
Le Bach Pham has been writing professionally after receiving his Bachelor’s of Art in English Literature from the University of California, San Diego in 2002. He now specializes in writing about legal, business and financial topics. Pham also earned a Paralegal Certificate from the University of San Diego and has experience working in the legal field. He also has experience in writing business plans for clients from various fields, including banking, finance, retail, education, beauty and various other sectors.