The forex market can be quite volatile, and time is of the essence here. To be able to make the right trades, you need to know the right time to enter and close your trades. However, most newcomers in the industry often enter the market running. They will often refer to economic calendars to make their trades. Visit MultiBank Group
They will watch the charts all hours of the day, all 5 days of the week, and with every release of data, find a convenient way to make trades all day long. That said, this is not the perfect strategy to follow as there are many complications with it.
Quite soon, the traders will deplete their reserves, and even the most determined trader will burn out. Contrary to the stock market, which only runs during regular business hours, the forex market has different running times.
Understanding the Different Forex Market Hours
It takes into consideration the business hours of four separate zones of the world. This means, depending on which part of the world you are in, trading can go on all day and night. However, it is not possible for any trader to work 24 hours every day.
This is why it is important to find an alternative way to make successful trades. The best way to understand what strategies work best for you, you will have to have a better understanding of the market hours.
This will help you set more appropriate and achievable goals. This way, you will also have a higher chance of gaining profits on your trades and have a more feasible schedule. Here is an overview of the four running times of the forex market. All timings given here are based on Eastern Standard Time.
- New York:
Known to be the second-largest forex trading platform, the New York markets open at 8 in the morning and close at 5 in the evening. The New York market is often closely watched by traders worldwide since the U.S. dollar makes up more than 90% of every trade.
Any kind of movement in the NYSE, short for the New York Stock Exchange, can have a quick and significant effect on the value of a dollar. For instance, when acquisitions get finalised, or companies merge, the dollar’s value can increase or decrease instantly.
Tokyo is one of the first Asian trading centres to open and functions from 7 in the evening to 4 in the morning. It plays a significant role in the Asian trading industry, ahead of even Singapore and Hong Kong.
The currency pairs that are most dominant in this market include USD/JPY, GBP/JPY and GBP/USD. Watching the USD/JPY pair when only the Tokyo Forex market is open can be quite beneficial for you since the Bank of Japan has a heavy influence on the market.
The Sydney Forex market is open from 5 in the evening to 2 in the morning and is where the trading day officially starts. Although Sydney is amongst the smallest mega-market, it often sees the majority of the initial action in the market.
This is especially true when the markets reopen on Sunday afternoons. This is mainly because every individual financial institution and trader tries to regroup after the Friday market closes.
Perhaps one of the most important forces in currency markets all around the world is the London market. This is open from 3 in the morning to 12 in the afternoon. London is often considered to be the central trading capital of the world and witnesses more than 40% of the entire global trading.
The city also plays an integral role in currency fluctuations since the Bank of England sets all the interest rates and has full control over the monetary policy for GBP. The majority of Forex trends commonly originate in the London platform as well.
This information can come in handy for technical traders. Usually, technical trading includes analysing and identifying market opportunities after considering price movement, momentum and statistical trends.
Knowing The Best Time To Initiate a Forex Trade
Now that you have a fair idea of when each of the four Forex markets functions, it is time to know how you can develop an effective schedule, allowing you to increase your profit margins. Currency trading can often be quite complicated, given the differing hours of operation. The week officially begins at 5 in the event EST on Sunday and goes till Friday at 5 p.m.
Continually placing trades on the market can often drain the trader. This further makes them unable to take quick action and reduces their critical thinking abilities. To make sure you are making all the right decisions, you should find a schedule that suits your trading habits and maximises profits.
However, it is important to note that not all trading hours are equally as good. You will be able to get the best returns on trades made while the market is most active. When two or more markets are open together, there will be a more active trading atmosphere. This will also mean that all fluctuations in currency pairs will be more significant.
On the other hand, when only one market is open, currency pairs often get locked in a tighter pip spread, most commonly 30 pips of movement. In the other scenario, you will easily witness movements higher than 70 pips, especially when any big news is brought to the attention of the market.
With this information now, you will be more than able to understand how each market functions and come up with a session schedule that fits aptly. Knowing how to manage your time between two simultaneously open markets can significantly improve your chances of gaining higher profits.
That said, before you enter the market, make sure you know that it is quite volatile, and even the slightest mistake can be expensive. While trading in two or more markets together, you should ensure to get enough rest so that you have a clear mind and can think straight.