With higher activity, trading spreads, or the differences between bid prices and ask prices, tend to narrow. At these times, less money goes to the market makers facilitating currency trades, which means traders can pocket more.
The 4 Major Forex Markets
Within the global market, the four major forex exchange markets are in London, New York, Sydney, and Tokyo. Forex traders often commit their hours to memory, paying particular attention to the hours when two exchanges overlap. While some investors fear market volatility because of the increased risk, forex traders generally prefer greater volatility because they have the potential to earn higher profits.
Worldwide Forex Markets Hours
The forex is fully electronic and open somewhere in the world between 5 p.m. Sunday and 4 p.m. Friday Eastern Standard Time (EST). Each region has major exchanges with unique trading hours from Monday through Friday. From the average trader’s perspective, the four key time windows RE (all times are in EST):
London: 3 a.m. to 12 p.m. (noon)New York: 8 a.m. to 5 p.m.Sydney: 5 p.m. to 2 a.m. (midnight)Tokyo: 7 p.m. to 4 a.m.
While each exchange functions independently, they all trade the same currencies. So, when exchanges in two markets are open, the number of traders actively buying and selling a given currency greatly increases. The bids and asks in one forex market exchange immediately impact bids and asks on all other open exchanges. That reduces market spreads and increases volatility, including in the following windows:
8 a.m. to noon, with both the New York and London markets open7 p.m. to 2 a.m., with both the Tokyo and Sydney markets open3 a.m. to 4 a.m., with both the Tokyo and London markets open
There can be exceptions, and the expected trading volume is based on the assumption that no major news will come to light. Political or military crises that develop during otherwise slow trading hours could potentially spike volatility and trading volume. Certain economic data that can move the market has a regular release schedule. Key economic data include employment figures, Consumer Price Index (CPI), trade deficits, and consumer confidence, and consumer consumption. Knowing when this news is set for release can help you plan when to trade.
High-Volume Forex Trading Hours Can Be Risky
Forex trading is risky. New forex investors should consider opening accounts with firms that offer demo platforms, which let them make mock forex trades. With the practice trades, you can tally gains and losses to see how you would perform with real trading. Once investors learn become more experienced, they can begin making real forex trades. Like many other investments, you can earn significant profits, but you could also suffer losses. So, make it a point to prepare for the risks involved.
