The foreign exchange market is the most liquid financial market in the world, with approximately $5.3 trillion in daily circulation. Forex is an over-the-counter product, so there is no central physical exchange where currencies are traded, unlike stocks that are traded on various stock exchanges.
The Forex market is an interbank market where large banks act as market makers, offering their own prices. This means that there are fewer trading restrictions, such as the time and place of trading, unlike the stock market, where traders are limited to a schedule of work at certain hours on weekdays.
What Are Forex Market Hours?
The working hours of the foreign exchange market (forex) are certain periods of time when traders and investors can make transactions in the foreign exchange market. The Forex market is open 5 days a week and closed on weekends.
These international currency markets play an important role in securing business around the world. They involve banks, commercial companies, central banks, investment management companies and hedge funds, as well as retail brokers and investors.
What time does the forex market open?
During the autumn and winter months, the Tokyo session opens at 12 a.m. and closes at 9 a.m. UK time. This is one of the world’s largest forex trading centers, this session accounts for about a fifth of all forex transactions. During the Asian session, there is likely to be more movement of currency pairs containing the yen, as well as Asia-Pacific currency pairs such as AUD/USD.
The London Forex market starts at 8 a.m. British time, and it accounts for about 35% of all Forex market transactions (about 2.1 trillion pounds per day). Due to the large trading volume during the London session, Forex spreads are likely to be lower, as liquidity is higher. However, the London session is also subject to high volatility, which often makes it the most favorable for trading major currency pairs that offer lower spreads due to the large trading volume. This session closes at 16.00.
The New York session opens at 13.00 and closes at 22.00 British time. At the beginning of the New York stock exchange session, liquidity is higher due to the coincidence with the previous London session. Towards the end of the session, as a rule, there is minimal movement as the trading day ends.
The Sydney Forex market is open from 20.00 to 5.00 British time, completing a 24-hour cycle of trading on the Forex market.
What time should you trade forex?
Theoretically, the effective time for trading on the Forex market is the time of the greatest market activity, when the largest trading volume occurs simultaneously. This environment provides high liquidity and narrower spreads. Therefore, the most optimal time for trading is the periods of overlap of open markets. The strongest overlap occurs between the London and New York sessions.
At this time, there is also high volatility, therefore, despite the fact that the spread was initially narrower, the release of important economic news may lead to an expansion of the spread. However, high volatility can be beneficial when trading on the Forex market. Read more about risk management in volatile markets in our Risk management guide.
The London session is also the busiest market of all, especially in the middle of the week. Trading on Friday, however, is less volatile, since there are fewer participants in the market, which means that liquidity is lower. It also depends on which currency pair you are trading, for example, yen trading will be more appropriate during the Asian session. Practice trading currencies on a demo account for trading spreads or CFDs.
What are the most volatile currency pairs?
Volatility depends on the liquidity of the currency pair and is manifested in how much the price changes over a certain period of time. This affects the spread, and the price movement is reflected in the number of points. There are pairs that naturally have higher volatility, but in the process of trading, many factors may arise that can lead to an increase in the volatility of the pair. The working hours of the Forex market can affect the volatility of the pair at certain times during the day, increasing or decreasing it.
Major currency pairs have lower volatility compared to exotic pairs, because with high liquidity, volatility is usually lower. Currency pairs from more developed countries have lower volatility because their prices tend to be more stable. In addition, supply and demand for emerging market currencies are lower. Learn more about the most traded currency pairs in the world.
What causes volatility in forex?
Major news events, such as Brexit, can cause volatility in the Forex market and increase spreads. Price fluctuations may also be affected by rising interest rates or commodity price spikes.
Trading pairs with low liquidity naturally means increased risk and is recommended for more experienced traders who have conducted research and developed a risk management strategy. More detailed information about the advantages and risks of Forex trading can be found in our guide “Best Tips for Forex Traders”.
Trade forex market hours in the UK
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To start trading on the Forex market, visit our article on Forex trading for beginners. For more experienced traders – an article on how to trade on the Forex market, where you will find professional advice and recommendations on fundamental and technical analysis.
Longer-term forex trading
Longer-term Forex trading is possible when using forward contracts. These contracts allow the trader to agree with his broker on the future price and date of execution of the transaction, while there is no charge for storing the transaction overnight. In this case, you are speculating on whether the value of the base quote will increase or decrease in relation to the other.