When it comes to Forex, what many people don't realise is that foreign exchange is the largest financial market in the world. Various markets around the world participate in trading through what are called ECNs (electronic communication networks). It is estimated that Forex trades around $5 trillion each day.
How does 24-hour Forex trading work?
Unlike the stock market, the Forex market is open 24 hours a day, although you have to consider that the market is closed on the weekend. The Forex market opens at 10pm GMT on Sunday and then closes at 10pm GMT on Friday.
Traders around the world are always making and meeting demands for a particular currency and because currencies are in such high demand, the Forex market is open 24 hours a day. This means that traders can trade Forex 24 hours a day, without a break. Forex has the ability to trade over a 24-hour window because of the different time zones around the world. Forex runs on a network of computers that are constantly trading currencies at all hours of the day and night rather than closing at a particular time. 24-hour Forex trading is also possible as this is an over the counter (OCO) market, which doesn't have a centralised exchange. People can engage in trading at any time, yet there are some periods of high volatility. Let's take a look at what actually happens when the market is open.
Who participates in 24 hours Forex trading?
Central banks and worldwide businesses are always in need of currency. Money makes the world go round and currency is always needed around the world for international trade. Since 1971, central banks have relied on foreign exchange markets to operate. Each day the Forex market opens in Australia/New Zealand and the rest of Asia, followed by Europe and then North America. Once one region closes, another region opens and continues to trade currencies on the Forex market. 24-hour Forex trading gives traders the ability to trade at almost any time of day. In other words, trading Forex is available almost any time; however, most brokers do have trading breaks. Trading breaks usually last for minutes in the currency market, and they give traders a chance to take a break too.
Everyday different economies fluctuate. This is due to political instability and other changes. Central banks look to stabilise their country's currency value by trading their notes on the open market and keeping a similar value compared to other currencies around the world. Due to the importance of currencies and the fluctuating economy Forex trades 24 hours a day and because of this Forex remains one of the most popular markets to trade in.
Where does 24-hour Forex trading take place?
There is no physical exchange during 24-hour Forex trading. Forex trading takes place on the internet. Since Forex is the world's biggest market for trading currencies, it is served by Forex brokers for Forex traders. Forex trading is done in pairs. Every week the currency market launches in New Zealand on Sunday which is their Monday. In any other market you are not able to trade assets until someone around the world is available to buy and sell trades from you. In the currency market you are able to trade Forex 24 hours a day.
What are the features of the Forex market?
Forex is a highly leveraged market. You can invest little money and control a lot. There is a lot of potential to make profits (and losses) during a 24-hour Forex trade. This gives many types of investors, small and big, the flexibility to take part in the market and help the currencies flourish. It is important to know which are the most active trading periods in which you can trade.
Central banks along with traders and brokers worldwide are able to trade Forex online 24 hours a day. Forex trading hours operate around the world like this:
New York between 01:00 pm – 10:00 pm GMT; at 10:00 pm GMT Sydney comes online; Tokyo opens at 00:00 am and closes at 9:00 am GMT; and then London opens at 8:00 am and closes at 05:00 pm GMT.
The Forex market has the potential to bring an investor a potential return on their investment (remember that also the opposite can easily happen). It also has room for beginners to learn how to trade with a small investment. All markets have risk even the Forex market. The beauty about Forex is that you can trade Forex 24 hours a day and have the flexibility to move currency more often. It is important to understand trading in Forex and be able to come up with strategies that can help you trade more efficiently. Whether you trade on the market yourself or go through an online broker, it is possible to become successful in making profits.
Do I need to trade Forex 24 hours a day?
It's not really possible for anyone to trade 24 hours a day – you'll get tired and start making bad trades. Even though the market is open 24 hours a day, it doesn't mean that you actually should trade every single hour of it. In fact, about half of the day doesn't experience big market moves. It of course depends on the currency pair, yet in general, the most active trading times start when the London trading session opens, and the best trading period occurs when the New York and London sessions cross.
This is of course mostly suitable for day traders. In addition to this, the previously mentioned market session overlap is mostly suitable for the major currency pairs, especially the ones that have EUR, GBP, and USD currencies as part of their quote. As a rule, there is usually some volatility for JPY pairs whenever the Tokyo market opens.
Trading Forex all day long doesn't really make sense. Market sessions are most useful for day traders, scalpers, swing traders, and break-out traders. If you are into positional trading, this won't really be that relevant to you.
What happens on holidays?
This is an interesting question. Generally, we can subdivide holidays into local days off and global ones. Whenever there is a local day off, trading doesn't usually stop. This is because there is an enormous amount of liquidity to back up almost any currency pair, especially the major ones. When it comes to exotic currency pairs and some crosses, you can actually see some pairs being disabled. For example, RUB pairs are not traded during Orthodox Christmas, as there is absolutely no liquidity when the Russian market is closed.
We refer to global holidays only because this is when trading is stopped everywhere. This does not necessarily mean that the whole world is taking a break, rather it means that trading on this day (or within the given hours) is not possible. An example of such a holiday can be Christmas. Even though it is not celebrated in the largest part of the world (geographically), it is celebrated in almost all major financial hubs, so Forex is not traded during this period.
When should I trade Forex?
The answer is rather simple – whenever you feel it is appropriate. You should not primarily base your trading strategy on the trading sessions, as the time simply indicates the possible volatility, not certain exit or entry points. If you are into day trading and your main trading instruments are GBP/USD (also known as Cable) and EUR/USD, then you would definitely experience the highest volatility during the overlap of New York session and the London session. This is the time mostly favoured by scalpers, as sometimes you can literally make a few trades within a minute.
Sounds exciting, where do I start?
Forex trading is fun and it could be done any time, but you should also know that it is risky especially if you have limited knowledge about Forex trading. Before you begin trading Forex online, it is recommended that you take a look at the risk disclosure documents and terms and conditions to understand how Forex trading functions and what are the possible risks involved are. Once you get a good sense of the market, we would suggest you open a Demo Account to try trading paper money at first. This will also help you in having hands on experience about 24 hour mode of the Forex market, session overlaps and volumes generated per session.
Should you require any additional information about Forex market hours or trading in general, you are more than welcome to visit our webinars, where you can ask questions and get them answered by proven experts.