:max_bytes(150000):strip_icc():format(jpeg)/GettyImages-1341797528-f3eb2406928b44ec913c8052c839a201.jpg)
Every minute of every weekday, traders use top forex brokers to buy and sell currencies. This nonstop activity makes the foreign exchange (forex) market unique among financial markets, with over $6 trillion changing hands daily. This 24-hour activity is made up of three trading periods in different parts of the globe, passing the baton from Asia to Europe to North America.
Around-the-clock trading allows investors from across the globe to trade during regular business hours, after work, or even in the middle of the night. However, not all times of the day are created equal when it comes to trading forex. There are times when price action is consistently volatile, and there are periods when it’s muted. The different exchange centers have different “personalities” that traders say are important to know when dealing in forex. Below, we take you through the trading clock and review what to watch out for as the hours of the day tick by.
Key Takeaways
- The 24-hour forex trading sessions can be done through top forex platforms and consist of three trading periods.
- Traders usually focus on one of the three trading periods rather than trading the market 24 hours a day.
- Activity peaks in the Asian, European, and North American sessions, which are also known by the main cities where trading occurs: Tokyo, London, and New York, respectively.
- Sessions will sometimes overlap, such as a four-hour period for peak activity in both Europe and North America.
- Volatility is sometimes elevated when forex trading sessions overlap.
Understanding the 24-Hour Forex Market
The 24-hour forex (FX) market offers considerable advantages for many institutional and individual traders since you can trade and potentially profit on currency movements, no matter the time during weekdays. Whether you’re an early bird in New York or a night owl in Singapore, you can access the market during your preferred hours.
However, just because the market never sleeps doesn’t mean you shouldn’t. Many individual traders make the mistake of trying to watch the markets around the clock, leading to exhaustion and poor trading decisions. It’s like trying to watch every episode of a TV series in one sitting—technically possible, but not the best use of your time. However, many traders automate some trades if prospects arise while away from their desks.
It’s important to note that the forex market can make dramatic moves at any time. For example, a surprise announcement from the European Central Bank could send the euro soaring while American traders are still asleep. That’s why successful traders typically focus on specific time windows rather than attempting to track every market move.
Tip
While algorithms trade 24/7, the biggest price moves still tend to happen when human traders in major financial centers are at their desks. That’s why session awareness remains crucial even in an age of increasing automation.
The Three Trading Sessions
The forex market operates in three main shifts, running 24/7. These shifts are known as the Asian, European, and North American sessions, nicknamed after their major financial hubs: Tokyo, London, and New York.
These cities aren’t just random choices—they represent the times when their respective regions see the heaviest trading activity. These sessions are busiest because that’s when local banks, businesses, and traders are most active in their respective markets.
| Forex Trading Sessions by Region and Market | |||
|---|---|---|---|
| Session | Major Market | Hours (GMT) | Hours (ET) |
| Asian Session | Tokyo | 12 a.m. to 9 a.m. | 7 p.m. to 4 a.m. |
| European Session | London | 8 a.m. to 5 p.m. | 3 a.m. to 12 p.m. |
| North American Session | New York | 1 p.m. to 10 p.m. | 8 a.m. to 5 p.m. |
Asian Forex Session (Tokyo)
The Asian markets are naturally the first to see action when liquidity is restored to the FX market at the start of the week. Activity from this part of the world is unofficially represented by the Tokyo capital markets, which span from midnight to 9 a.m. GMT.
Notable countries other than Japan also trade during this period, however. They include China, Australia, New Zealand, and Russia.
Here are some general characteristics of this session:
- Lower volatility: This session often has less volatility compared with others, with more subdued price movements. The Asian session typically sees more reserved, technical trading with smaller price movements.
- More range-bound trading: Given the above, traders often watch for range-bound movements, where currencies trade between consistent high and low points.
- Regional focus: Currencies such as the Japanese yen (JPY), Australian dollar (AUD), and New Zealand dollar (NZD) are more active.
- Influence of economic data: Economic releases from countries like Japan, Australia, and New Zealand can impact market movements during this time.
Fast Fact
The forex markets include all types of traders at any given time; however, at certain times throughout the day, traders can expect to see more central bank activity during the Asian hours. Commercial banks tend to dominate European sessions, and New York sessions tend to have more trading by institutional investors.
European Forex Session (London)
The European session takes over to keep the currency market active just before the Asian trading hours close. This FX region is very dense and includes several major financial markets. London takes the honor of defining the outlook for the European session.
This trading period can start before the official opening in the U.K. because of the presence of other capital markets, including Germany and France. The end of the session is pushed back as volatility holds until after the close. European hours generally run from 8 a.m. to 4 p.m. GMT.
Here are some general characteristics of this session:
- High liquidity: This session typically has good liquidity, meaning traders can execute large orders without significantly affecting prices. The London session is the most active worldwide, accounting for a significant portion (about 30%) of daily forex trading volume, with Europe accounting for more than 40% overall.
- Major currency pairs: Pairs involving the euro (EUR), British pound (GBP), and Swiss franc (CHF) see heightened activity.
- Euro news impact: European economic reports tend to create immediate market reactions since many traders are actively watching.
- Market trends: This session often sets the tone for the day’s trading, with trends sometimes continuing into the New York session.
Important
Trading sessions can start before and extend beyond set or official trading times depending on the degree of activity.
North American Forex Session (New York)
By the time the North American session comes online, the Asian markets have already been closed for several hours, but the day is only halfway through for European traders. Accounting for about a third of forex trading worldwide, this session is dominated by activity in the U.S. Activity in New York City represents the high volatility and participation rate for the session.
The North American hours may unofficially begin before their GMT start time, taking into account the early activity in financial futures, commodity trading, and the concentration of economic releases. The considerable gap between the close of the U.S. markets and the opening of Asian trading can mean a lull in liquidity. This puts the close of New York trading at 10 p.m. GMT as the North American session closes.
- High volatility: This session has a “personality” all its own—the morning overlap with London sees some of the biggest moves of the trading day, while the afternoon can be more technical and choppy as European traders head home.
- USD-centric pairs: Currency pairs involving the U.S. dollar (USD), such as EUR/USD, GBP/USD, and USD/JPY, are prominently traded.
- Economic data impact: U.S. economic indicators, like nonfarm payrolls and U.S. Federal Reserve announcements, can cause significant market movements.
Fast Fact
Each trading session has its own rhythm. Many traders think that Asian sessions build the foundation for the day, European sessions set the direction, and New York sessions often determine if those trends will hold.
Effects of Overlapping Trading Sessions
The Asian/European sessions overlap, sometimes creating more volatility due to increased trading activity during these hours. This shows the uptick in the hourly ranges in various currency pairs at 7 a.m. GMT.
Image by Sabrina Jiang © Investopedia 2020
There will be a greater response to the Asian/European session overlaps and a less dramatic increase in price action during the European/U.S. sessions’ concurrence if the currency pair is a cross made of currencies that are most actively traded during Asian and European hours. An example would be EUR/JPY and GBP/JPY.
The presence of scheduled event risk for each currency will still have a substantial influence on activity, regardless of the pair or its components’ respective sessions.
Image by Sabrina Jiang © Investopedia 2020
Trying to establish a position during a pair’s most active hours could lead to a poor entry price, a missed entry, or a trade that counters strategy rules for long-term or fundamental traders. However, volatility is vital for short-term traders who don’t hold a position overnight.
Impact on Trading Strategies
A market participant must first determine whether high or low volatility works best with their trading style when trading currencies. Trading during session overlaps or typical economic data release times may offer profit opportunities if substantial price action is desired.
A trader must also decide what time frames are most active for their preferred trading pair. The European/U.S. session crossover will provide the most movement for the EUR/USD pair. There are usually alternatives to trading in this session, and a trader should balance the need for favorable market conditions with having a life beyond the trading screen.
Market participants from the U.S. must wake up early in the morning to keep up with the market if they prefer to trade the active hours for GBP/JPY, assuming they prefer to handle things on their own rather than work with a broker.
Is Greenwich Mean Time (GMT) Still the Standard for Time?
GMT is no longer the standard for worldwide time. The standard has been Universal Time Coordinated (UTC) since 1972. Their times are the same, but GMT is a time zone and UTC is a time standard.
Can I Trade FX on Weekends?
Not really. The forex market is available 24 hours a day during the week but it closes at about 5 p.m. on Fridays and reopens at 5 p.m. on Sundays.
Is There a Best Time to Trade Forex?
There’s no official best time but many traders feel that 8 a.m. to noon ET holds great potential because of the overlap of the London and New York trading sessions. Substantial data is released in the U.S. in these hours. There are many participants and the market experiences volatility and liquidity, especially for USD pairs.
The Bottom Line
The forex market is essentially open for business 24 hours a day, five days a week due to the three major forex trading sessions across the world. It offers substantial potential for profitable trading as a whole.
That doesn’t necessarily mean you should monitor and take part in every session, however. Lack of sleep could lead to exhaustion and errors in judgment, even if you’re a professional trader. An alternative may be to trade during the hours that make up the European/U.S. session overlap, where volatility is still elevated even though Japanese markets are offline.
