Everyone knows that one of the major advantages of trading in currency, rather than other markets is that the forex market is open 24 hours a day, every weekday. Because of this, many new forex traders jump right in. Unfortunately, this does not work very well and can deplete the capital of the trader very quickly. The forex market follows business hours of four different time zones, but rather than staying up all day and night, it is important to understand the hours and make your goals accordingly.
Knowing the Market Hours
While the forex market opens at 6pm EST and closes at 4pm on Friday, not all of these hours are equally good for trading. The best hours to trade the market are those hours when the market is most active and if more than one of the four markets is open at once, there will be more trading. In this scenario, there will be more fluctuation in trading currency pairs, as opposed to when only one market is open and currency pairs can easily get locked into a tight pip spread.
The four markets:
- New York – Open from 8am to 5pm EST, this is the second largest forex platform in the world.
- Tokyo – Open from 7pm to 4am EST, it takes the bulk of Asian trades.
- Sydney – Open from 5pm to 2am EST, it is the first market to open in the week and while it is a small market, it sees a lot of action when it re-opens after the weekend.
- London – Open 3am to 12pm EST, London is known as the trading capital of the world, accounting for around 34 percent of global trading.
There are three overlaps between the trading markets that happen each day and these are generally the best hours to trade.
- US/London – overlaps 8am to 12pm which is the most significant length of time of any overlap and which sees more than 70% of trades as the USD and EUR are the most popular currencies.
- Sydney/Tokyo – overlaps 2am to 4am and is significant for EUR/JPY pairs.
- London/Tokyo – overlaps 3am to 4am.