Foreign Exchange Market - The Market Hours (Module 4)
The process of forex trading is never complete without the foreign exchange market. The forex market isn't a regular market that most people imagine at first. It is more than a market wherein traders buy and sell currency pairs.
Foreign Exchange Market
The forex market doesn't exist physically. It is an online global network where traders buy and sell currencies. The forex market operates 24 hours per day and five times every week.
The forex market is consists of central banks, commercial companies, investment management firms, hedge funds, retail forex brokers and its investors. It is considered to be the largest financial market around the world.
Characteristics of a forex market
The forex market has high liquidity. Its high liquidity attracts global currency traders that result in a bulky trading volume. The more trading volume means higher liquidity.
Unlike the stock market, the forex market never closes (except during weekends). Upon closing of one major forex, another forex market in other parts of the world opens. Majority of traders find this characteristic as an advantage. It greatly provides convenience to those traders who do trading as a part-time.
The Forex Market Hours
Forex trading has four different sessions and each has its opening and closing hour. There's New York session, London session, Tokyo session, and Sydney session.
The open and close times of the forex market will depend on local business hours. Keep in mind that on the months of October and April, there are a few countries shifting to or from daylight savings time.
The Overlapping Sessions
There are three overlapping zones in forex market hours. At that moment, the markets do trade simultaneously. It is the busiest time wherein traders desire to participate, resulting in greater trading volume.
Then again, the more trading volume, the higher the liquidity will be.
Tokyo-London overlap session time is thin usually. The European traders at this time are just preparing to go to their day jobs. You can anticipate dry liquidity because there's not much movement at this moment. You can relax during this session or maybe look for a good trade for the London-New York overlap.
The busiest time for the forex markets. The traders coming from the two largest financial centers starts to fight head to head. You can hold unto big moves based on the news coming from the U.S. and Canada. You can also watch out for updates coming from Europe which could trigger big movements on the markets.
There will be a lot of trading opportunities boosting compared to their regular price movements.
When is the best time to trade?
The main concept to remember is getting yourself involved in the biggest pot wherein the markets are very busy.
Majority of traders choose the first three to five hours of all sessions as the best time to do trade. That principally due to the fundamental analysis points on the new economic calendar are released.
That ends our topic for module 4 of our module series “Easy Forex: Trading Guide for Beginners.” Watch out for the next module to be posted soon.
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