Forex Market Hours: Why Does It Open 24 Hours A Day?

Foreign exchange, also called forex or FX, is the world’s largest financial market. It is a global marketplace where currencies are traded through phone and electronic communication networks (ECNs) across different markets globally. Due to the international demand for currency, the forex market hours are flexible. There are always traders across the globe making and meeting demands for a particular currency. Global businesses, central banks, and international trade all require currency, with central banks relying heavily on foreign exchange markets since the drop of the gold standard in 1971.

The forex market is usually open 24 hours a day, five days a week. This means that as a trader, you can enter or exit the forex market at any time of the day or night, regardless of your location. But have you ever wondered why the forex market is open 24 hours a day? This article will answer this question and discuss the most important forex trading hours.

Read More: Best Forex Trading Platforms 2024

How Does Forex Trading Work?

Forex trading involves buying and selling currencies in pairs, such as EUR/USD, GBP/USD, or USD/JPY. The objective is to profit from exchange rate fluctuations between two currencies based on the supply and demand of the currencies. The pace of economic growth, interest rates, central bank policy, and a country’s political environment all influence the demand for currencies. Forex traders use technical and fundamental analysis to predict the price movement of a currency pair and make trading decisions based on their analysis. 

There are different ways to trade forex, and you can choose which fits your trading goals. These methods include the spot market, the forward market, and the futures market. Most forex traders who wish to speculate or protect themselves against potential fluctuations in currency prices use the forward and futures markets. The spot market, the biggest of the forex markets and the location of most forex deals, is the basis for the exchange rates used in these markets.

The Reason Behind Forex Trading Hours Sessions?

The forex market can operate 24/7 because trades are conducted through computer networks; hence, it is not limited by any single market exchange that closes at a particular time. In contrast, other securities, such as domestic stocks and commodities, are usually traded within standard business hours in their home country due to lower demand. The forex market sees $6.6 trillion in daily trades and follows a pattern of opening in different regions, with overlapping trading periods being the busiest.

4 Most Important Forex Market Hours

The international currency market includes central banks, investment management firms, retail forex traders, commercial banks, and investors worldwide. Unlike other markets, the forex market doesn’t have a dominant exchange or broker because it involves multiple exchanges and brokers worldwide. 

There are four major forex trading hours that have the most significant impact on the forex market. Although the time zones can overlap, here is the generally accepted time zone for each region:

• New York 8 am to 5 pm EST (1 pm to 9 pm GMT)
• Tokyo 7 pm to 4 am EST (12 pm to 9 am GMT)
• Sydney 5 pm to 2 am EST (9 pm to 6 am GMT)
• London 3 am to 12 noon EST (8 am to 4 pm GMT)

4 Major Forex Markets

Generally, there are four main forex trading sessions. The Tokyo and Sydney trading sessions are referred to as Asian trading sessions. Here are some characteristics of these forex trading sessions: 

• London Session – The London session is the most active trading session, accounting for over 30% of the total Forex trading volume. It starts at 8:00 AM GMT and closes at 4:00 PM GMT.
• New York Session – The New York session is the second most active trading session, accounting for about 20% of the total Forex trading volume. It starts at 1:00 PM GMT and closes at 9:00 PM GMT.
• Tokyo Session – The Tokyo session is the third most active trading session, accounting for about 10% of the total Forex trading volume. It starts at 12:00 PM GMT and closes at 9:00 AM GMT.
• Sydney Session – The Sydney session is the least active trading session, accounting for about 4% of the total Forex trading volume. It starts at 9:00 PM GMT and closes at 6:00 AM GMT.

When is the Best Time to Trade Forex?

The best time to trade forex is determined by your local time zone, trading strategy, and trading time. For instance, if you plan to trade with high market volatility and big price movements, then the London session will suit you well. Generally, the busiest time zones are London and New York. 

The most active forex trading hours are during the overlap of the London and New York trading sessions, which is from 1:00 PM GMT to 4:00 PM GMT. During this time, forex market participants from different financial centers worldwide are active. There is a lot of trading activity and liquidity, which can lead to more significant price swings. Also, currency pairs like EUR/USD will experience a higher trading volume when both London and New York trading sessions are open.  

Price Swings in The Foreign Exchange Market

Price swings in the forex market are influenced by a wide range of factors, including economic indicators, central bank policies, political events, and forex market sentiment. These factors can cause significant fluctuations in the exchange rate, which a successful forex trader will hope to capitalize on. 

Generally, central banks trade their country’s currency on the open market to stabilize it. International businesses enter currency swaps to lessen the risks of doing business in foreign markets and currency risk. This gives them the right to buy foreign currency at a future date at a price in a different currency. Through this strategy, businesses limit their exposure to large fluctuations in currency valuations.

The Top 2 Forex Trading Platforms

eToro

eToro is a popular forex broker that stands out for its user-friendly copy-trading platform. It allows traders to replicate the trades of a successful forex trader or receive rewards for sharing their strategies. The key selling points of eToro are social or copy trading, and it is best for cryptocurrency, stock, and ETF traders. The broker offers a wide range of tradeable instruments, including CFDs, forex, and exchange-traded securities, providing a comprehensive trading experience.

eToro is an ideal platform for novice traders looking to crowdsource investment ideas through copy trading. It also suits experienced traders who want to share their trading strategies and receive rewards. Its user-friendly platform is particularly beneficial for inexperienced traders who need guidance. With over 25 cryptocurrencies to trade, eToro has a larger selection than most other U.S. crypto brokerages. The broker is a more well-rounded option for investors looking to diversify their portfolios in 2022, including shares and a small range of ETFs. However, eToro may not be the best option for high-volume or active traders due to its high spreads and small maximum trade sizes, and algorithmic trading is not supported. Nevertheless, eToro is an excellent choice for social trading and cryptocurrency trading.

CMC Markets

Established in 1989, CMC Markets (CMC) is a highly regarded UK forex broker that has adapted well to the changing online brokerage landscape. It is a publicly-traded company listed on the London Stock Exchange (LSE) under the ticker symbol CMCX. CMC Markets has a feature-rich platform that caters to all types of traders. This platform also offers a plethora of research amenities and educational resources. CMC Markets’ key selling point is its extensive range of offerings.

CMC Markets caters to traders of all levels, from beginners seeking to enter the world of forex to professionals seeking to expand their portfolio. CMC Markets provides a very broad product catalog. Also, customer service is a priority for CMC Markets, and this includes live brokers available by phone 24 hours a day, seven days a week, as well as a chat facility. The company’s fees are competitive in the industry, making it an attractive option for traders looking for a cost-effective trading experience. However, it is worth noting that CMC does not accept traders from the United States, a common restriction among forex brokers.

Final Thoughts

In conclusion, the forex market is open 24 hours a day because it operates in different time zones across the world. We can confidently say that there is no point during the trading week that a forex trader cannot make a currency trade. The most important forex trading hours are during the trading sessions that overlap between the London and New York trading sessions.

Frequently Asked Questions (FAQs)