What are the Major Financial Markets

The Forex market centers operate in different time zones with different opening and closing hours. The major global centers for currency trading include Frankfurt - Germany, London - U.K., New York - US, Sydney -Australia and Tokyo - Japan. Although these centers operate 24-hours a day, 5-days per week, the main hours of operation for these markets are set between 08:00 and 16:00 in their local time zones.

For example, your trading success is enhanced during periods of high activity where volatility exists in the market. When trading is light, there is little benefit to be gained – even if there is an overlap of markets. The major financial centers include Tokyo, London and New York, and this is where most of your activity should ideally be concentrated. Once you start trading Forex, you will quickly learn which times are best suited to these important overlaps between major financial centers.    

While the number of transactions in the foreign exchange market is difficult to quantify, it is estimated that $4 trillion of turnover occurs daily. This decentralized market is significant to the extent that it pays to have an intimate understanding of opening and closing times of major Forex markets.

What Is the General Trading Calendar?

Forex trading is quite possibly the most flexible and interesting market in the world to trade. Conventional ‘work’ hours like 9-to-5 simply do not apply when the broader market is taken into account. The currency market effectively runs 24-hours a day, 5-days a week – Monday through Friday. Thanks to multiple time zones around the world, vis-a-vis bourses, you can immerse yourself in currency trading around the clock when you have a free moment.

Before you get started, though, it is important to understand precisely what your foreign exchange trading objectives are, since this will determine which hours of operation are best suited to your currency trading needs. Naturally, USD currency traders will be better served when US markets are open, and GBP currency traders will be better served when UK and European markets are open. There are multiple factors that need to be taken into account when it comes to establishing yourself as a Forex trader.

Your tactics, strategies, investment portfolio and analytical insights will certainly impact your success as a Forex trader. We are about to introduce you to the general Forex trading calendar, showing you which markets are active during which times, and how you can trade during the overlaps. You may wish to incorporate Forex trading into your daily routine, or you may wish to “fit” your daily routine into your Forex trading sessions. Either way, it is imperative to choose the hours of operation that will best serve your Forex trading needs.

When is the Best Time to Trade Forex?

Now that you know when markets overlap, you can start to formulate a Forex trading plan based on your particular currency preferences. The most popular currencies are the USD, CAD, AUD GBP, EUR, CHF, and JPY. As a result, you will derive maximum benefit by trading currency pairs when the Asian, US and European markets are open simultaneously. Granted, there is a small window when all three major regions overlap – but this is the most profitable time to trade currencies online.

Features of the Major Trading Centers

The Asian Trading Session

Sydney opens at 22:00 GMT and this officially marks the start of the Asian trading session. At 00:00 GMT, Tokyo comes online and the Asian trading session increases in volume.. During the Asian trading session, the Japanese yen is the most heavily traded currency, followed by the Australian dollar and the New Zealand dollar.

The European Trading Session

At 08:00 GMT, London opens for equity trading. At the same time, Tokyo is in operation, but the overlap only lasts for one hour. The number of market participants is immense when London and Europe are trading and significantly large market movements take place. At this time, Asian day traders are exiting positions and European day traders are entering positions. All currency pairs are traded during the European session, spreads are smaller and volumes are high. The London market is responsible for an estimated 38% of total trading volume – greater than New York and Japan combined.

The American Trading Session

At 13:00 GMT the American trading session begins. During this trading session, an estimated 19% of all currency trading transactions takes place. There are 4-hours of overlap between the American trading session and the European trading session. Trading volumes are higher during this period but volumes taper off when the European market closes. The American trading session features heavy trading of all major currency pairs. In all markets, there are two notable trading sessions – mornings and afternoons. With overlaps, the number of traders increases, volume is heavier and liquidity is higher. This means you are less likely to see slippage and spreads are reduced. Forex market conditions change depending on national holidays in the US or UK, since these countries are responsible for the highest trading volumes.  

Trading Forex on Weekends

Since Forex trading doesn’t require a physical location, it is easy to trade over electronic platforms. All that is required is the presence of buyers and sellers – which is facilitated by these regulated trading platforms. It is best to avoid holding open positions during weekend hours if you are a day trader or a swing trader. It is best to exit positions by the close of the trading day on Friday before the expiration of the American trading session. Significant gaps can occur between the closing price on Friday afternoon and the opening price on Sunday night for the particular currency pair you are trading. The inherent risks of trading currency pairs over the weekend make it unsuitable to everyday traders. If you decide to trade Forex over the weekend, be sure to use a trading diary or journal to mark closing prices. Be sure you understand the importance of the ‘gap’ before you enter a trade. Adjust the percentages to fit your risk tolerance preferences.