Over $6.6 trillion in currency options are being bought and sold each day worldwide. This indicates how much trading is taking place and how essential it is for many businesses.
Despite a shaky and volatile past year, the forex market continues to grow. If you believe this market is appropriate for you, you need to do some research and learn a bit about how it works. One of the prominent advantages of working in this market is that the foreign exchange market is open twenty-four hours a day.
Carry on reading to learn more about why forex never rests and how you can trade forex around the clock.
Forex Market Open 24 Hours
One of the most frequently exchanged marketplaces is the foreign exchange market, or forex market. This 24-hour market enables banks, businesses, and people to swap currencies. For foreign commerce and global businesses, the currency is always in demand.
The market is built on various geographical trading sessions that enable you to trade 24 hours a day, 5 days a week. You can locate one market at some time during the day. You can also take advantage of two markets open at the same moment.
Countries have currencies that differ depending on their economic situation. Some nations base the worth of their currency on another country. For example, the currency of Belize is worth one-half of the value of the US currency.
Other currencies are circulated and fluctuate continuously based on political, economic, and financial factors. The quantity and demand of the currency also affect its worth of the currency.
How the 24-Hour Forex Market Benefits Traders
You can trade on this 24-hour exchange market starting at 10 pm GMT on Sunday and continuing through Friday at 10 pm GMT. The market is open because of the high demand for currency by central banks, governments, and international businesses.
For traders day trading in the stock market, they are restricted to certain hours. For instance, the New York Stock Exchange is open from 9:30 to 4:00 pm ET. Day trading on the stock market is tough to manage if you have full-time employment.
With forex marketplaces, you can invest at any moment of the day. Every day, the forex markets in the world open in Australia/New Zealand, Asia, Europe, and then North America. For investors who are beginners or who value freedom, this is a fantastic chance.
Four Major Trading Sessions
The different trading sessions allow traders to pick a time that works for them. There are 4 main trading sessions:
- Sydney - 3 pm to 12 am EST
- Tokyo - 7 pm to 4 am EST
- London - 3 am to 11 am EST
- New York - 9 am to 5 pm EST
The various trading sessions have varying volatility and liquidity that will affect your trading approach. You will benefit from a smaller spread and higher volatility if you choose to trade during the major forex marketplaces, such as London and New York. Whether this is something you are interested in relies on your trading plan.
Impact of the Overlap of Sessions
The trading periods occasionally cross over. This is when the exchange market is busier with greater trading volume. The increased action occurs if the currencies you want to exchange are from open markets at the same overlapping period.
For example, both European and US classes are open between 8 am and 11 am EST. You will notice that the trading activity for EUR/USD is higher right now. From 7 pm to 12 pm EDT, the Tokyo session overlaps with the Sydney session.
Exchange market options are derivatives or futures transactions based on fundamental currency combinations. The currency pair sold will determine your trading approach. When the London session opens and combines with the New York session, the busiest time begins.
Liquidity and Volatility
A forex currency combination has more liquidity if at least one market is open. For example, if you want to exchange US currency and Japanese yen, you want to ensure that either the US or Tokyo session is open. USD/JPY will be most busy when the US or Tokyo session is open and not as active when the European session is open.
The London and New York meetings are more liquid and volatile than other overlapping periods. Some traders favour high volatility, but you should consider this as you create your trading plan.
To better grasp overlapping sessions and how they affect your trading strategy, research before you start trading or even sign up for a demo account. Forex calculators like the forex margin calculator help beginners comprehend trading account leverage.
Should You Trade All Day?
Even though the forex markets are open 24 hours a day, your forex plan must consider volatility and liquidity. Trading continuously throughout the day might not be effective for you and may not be a sound trading plan. For most of the day, there may not be enough action or major market movements you can profit from.
The London and New York overlapping session is your finest trading time if you are a day trader. You can exchange many of the most common currency pairs, including USD, GBP, and EUR.
On municipal festivals, trading continues. You still have the liquidity to purchase and trade currency combinations. Some worldwide festivals have no liquidity, for example, the Russian markets on Orthodox Christmas.