In this article you will be able to find a lot of information regarding forex trading hours.
Among them are:
- The opening hours (in UTC but also in GMT, CET and EET)
- How a typical day is made up in the forex market
- The worst and best time to trade forex
- What happens during the worst forex market hours
When does the forex market open?
The forex market is open 24/5 due to the presence of 4 sessions that open at different times. The forex sessions are that of Sydney, Tokyo, London, and New York.
Forex time is primarily calculated using UTC, but depending on the broker and the area of the world in which you are engaging in forex trading, GMT, CET or EET times may also be used.
|21:00 – 06:00
|00:00 – 09:00
|07:00 – 16:00
|13:00 – 22:00
|21:00 – 06:00
|00:00 – 09:00
|07:00 – 16:00
|13:00 – 22:00
|22:00 – 07:00
|01:00 – 10:00
|08:00 – 17:00
|14:00 – 23:00
|23:00 – 08:00
|02:00 – 11:00
|09:00 – 18:00
|15:00 – 00:00
Characteristics of the typical forex market trading day
21:00 – 00:00: The Sydney session opens at 21:00 UTC. At this time trading volumes are low as there are not many forex traders in the international currency market. Among other forex trading sessions, this one is the least volatile, and therefore the most stable. Australian, New Zealand forex traders are the most active.
00:00 – 06:00: While the Sydney session is still open, Tokyo opens at 00:00 UTC. Trading volumes are always relatively low, but higher than in the Sydney session. This is considered by Australian traders to be the good time to trade due to higher volumes and liquidity. They trade a lot of AUD, JPY pairs such as USD/AUD, USD/JPY, AUD/JPY. At 06:00 UTC Sydney closes, and only Tokyo remains open.
06:00 – 07:00: Tokyo remains open one hour without overlap. Liquidity goes down. Being the first real Asian-only session, JPY pairs move a lot, especially the USD/JPY.
07:00 – 09:00: At 07:00 UTC the London session opens and overlaps with Tokyo for 2 hours. Liquidity starts to increase, however there is still not much activity and liquidity compared to other trading sessions.
09:00 – 13:00: this is one of the main forex trading sessions, as the London session accounts for almost 50% of global trading: it overlaps with both the Asia and New York sessions, because the time zone allows many traders to trade during this time slot, and because most multinational banks have their branches in London, which operate during the London session. Liquidity is very high during the London session.
13:00 – 16:00: the New York session opens at 13:00 UTC and overlaps with London until London closes at 16:00 UTC. Many believe that this is a good time to open trading orders if you want to trade volatility, as volatility increases the most when the London foreign exchange market session overlaps with the New York forex trading session. Volatility gradually decreases until the overlap ends. Currency pairs that are most affected by the overlap are EUR/USD, USD/JPY, GBP/USD due to interbank activity between the US and Europe/London.
16:00 – 20:00: Forex markets are very active during this period, as the US dollar is involved in nearly 90% of overall forex transactions. Traders keep an eye on U.S. economic data released by the Federal Reserve and follow U.S. forex market developments, as all of these factors can have an impact on the USD.
20:00 – 22:00: The New York session and the Sydney one overlap and the currency market closes. Despite the 24-hour opening, there is a sharp drop in trading activity during this time frame. This happens because Americans are ending their day, while Australia and New Zealand are about to start their day.
What is the best time to trade forex?
The best time to trade forex is between 1pm and 4pm (UTC) because that is the time when the London and New York sessions overlap.
London is the forex capital of the world, and the United States also generates good forex volumes.
This overlap makes the forex market extremely liquid and volatile, allowing traders to place orders more easily due in part to the continuous market inputs and movements.
Although volatility allows traders to constantly find an entry-point for the order, it is also a risk for less experienced traders who do not know how to manage the risk and pressure of trading in a very volatile market.
What is the worst time to trade forex?
The worst times to trade are right before and right after market news, or during or shortly after holidays or rest periods.
Market news: forex brokers always offer economic calendars to their traders. In these calendars are marked all the news that could positively or negatively impact the market. When a piece of news comes out, the markets are extremely volatile, so much so that they may lack liquidity and there may be a risk of not being able to close their orders.
Holidays: during holidays, including weekends, forex markets slow down. With slow markets, volatility and liquidity also decrease. This causes the fact that there is not enough movement to effectively trade. In such cases, it is sufficient to wait a few days so that markets reset.
Seasonality: forex markets are much less volatile in summer and the second half of December, as opposed to autumn and the periods between January and August.
What happens during less liquid forex trading hours?
Between 21:00 UTC and 06:00 UTC market liquidity decreases, which causes spread increases and possible difficulties in opening or closing orders.
Liquidity: liquidity is availability of an asset (in this case currencies) in the market. The more people who participate, the more liquid the market will be, the narrower the spreads will be.
Opening and closing: when opening or closing orders, forex brokers try to match traders’ orders with those of a counterparty. For example, if a trader places a “Buy” order on the USD, the system will look for a trader who has a “Sell” order on the USD. However, when there is a shortage of counterparties, the broker may struggle to execute their traders’ orders.
Requotes: a side effect of a lack of liquidity are requotes, which is a change in price from what the trader wants. If a trader places a Buy order on EUR/USD at 1.0000, but there are no “Sell” orders at 1.0000 in the forex market, the broker will look for a “Sell” order at a similar price. As a result, it may happen that the requote will charge the trader more than expected.
Most volatile moments to trade the major forex pairs
The volatility on major pairs depends on various factors, including also the type of forex pair and forex market news.
In any case, trading forex pairs during times considered best for trading does not mean guaranteed profits.
On the contrary, trading forex pairs during times of higher volatility is very dangerous for inexperienced traders, as price swings can be higher than the norm.
Below you can find some examples:
GBP/USD: great at the cross between the European and U.S. markets, as well as at the opening of the London market, since both British and U.S. traders are active. Not as good during the Asian sessions.
EUR/USD: It is the most liquid currency. There is a significant increase in forex trading movement from 07:00, until 22:00 UTC, particularly from 13:00 to 16:00 UTC when the London and New York sessions overlap. Not as good during Asian sessions.
USD/JPY: best from 12:00 to 15:00 UTC. Worse from 3 to 5 a.m. when the Tokyo market closes and from 9 to 12 UTC when the New York forex market has just closed.
USD/CAD: best during the overlap between the US and London sessions. During the period between 12:30 UTC and 13:30 UTC, a large number of news items regarding economic life in the United States and Canada are released, which further increases volatility.
AUD/USD: The best forex market hours for trading this currency pair is generally between 19:00 and 04:30 UTC, and during the NY-Sydney overlap.
NZD/USD: the best trading hours for this currency pair are during the Asian sessions and the Sydney session. In case of overlap, it is generally a good time to trade NZD/USD, so from 00:00 UTC and 18:00. The worst time is outside these times, as these are correlated currencies.
GBP/EUR: 8:00 UTC is a good time to start trading EUR/GBP. The pair remains liquid until 16:00 UTC during the London and European sessions. This currency is almost always quite liquid, however outside these hours spreads can be higher.
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