What are forex market hours?
Forex market hours are basically the operating hours of this particular asset. Just like how most establishments have operating hours, the forex market also has a set time where traders can freely invest in this asset class.
Things to know about the forex market
- As long as the forex market is operational, you can open and close positions or execute trades.
- You can execute trades on the forex market 24 hours a day during weekdays. The market is closed during the weekends.
- The forex market operates and is decentralized by four particular sessions, New York, Sydney, London, and Tokyo.
- The highest trading volume typically occurs when the New York and London trading sessions overlap.
- Trading volumes differ based on the operating session.
- Daylight savings time is applied to forex market hours, but this depends based on the region.
- Remember that the forex market hours change in November, October, and March because of daylight savings time.
Understanding Forex Market Hours
The four financial centers are responsible for setting the forex market. These financial centers are New York, Tokyo, London, and Sydney. Despite being located in Australia, the Sydney forex trading session begins in New Zealand.
As previously mentioned, the forex market is open 24 hours from Monday to Friday and is closed during the weekend. This means as soon as 5 PM hits on a Friday, the market closes, and you can execute trades again after 48 hours. However, depending on your location, your country may have different trading conditions.
You can freely access any of the international currency markets during the weekdays. These are made up of commercial companies, banks, investment management firms, central banks, hedge funds, and retail forex investors and brokers.
The forex market does not operate under one market exchange. It involves a wide range of brokers and exchanges globally. Forex market hours determine when trades can be executed in each country. The most active trading period for each region is as follows.
- New York – 8 AM to 5 PM
- Tokyo – 7 PM to 4 AM
- Sydney – 3 PM to 12 AM
- London – 3 AM to 11 AM
The most active sessions are the New York and London sessions. It is ideal for forex traders to open positions during active hours. This is because the market is more liquid and has more sellers and buyers.
Although the forex market is open 24 hours during weekdays, this doesn’t mean that all currencies are being traded during this time period. Take exotic currencies into consideration. These come from emerging markets, which, on their own, don’t really make it all that appealing to forex traders.
The most widely traded currencies are Euro, British Pound, Canadian Dollar, Swiss Franc, Australian Dollar, and US Dollar. These currencies are paired with one another or with minor or exotic pairs. These are traded 24 hours a day during weekdays, but they are possibly more profitable during peak hours, resulting in heavier trading volume.
Heavy trading volumes mean there are more participants. Usually, forex brokers provide tighter bid and ask prices or spread when trading volumes are heaviest. This is ideal for forex traders because it reduces their trading fees.
In the event that Christmas and New Year fall on a day where the forex market is usually open, the market will remain closed. Only these two global holidays affect the forex market. However, it’s best for you to check with your broker if they remain operational during other holidays.
Forex Market Terminologies
#1: Trading Session
A trading session refers to the timeframe where you can open and close positions in the market. For Forex, specifically, there are four major trading sessions: London, Tokyo, Sydney, and New York. These four major trading sessions allow the forex market to be open for almost 24 hours a day.
#2: Overnight Position
Overnight positions are really common in the forex trading scene. Either long-term traders and swing traders hold these positions, but not day traders. As the term suggests, overnight positions are open trades that remain open even at the end of the trading day.
Having these kinds of positions poses more risk to traders because of unforeseen news or events that may affect the market and its movement.
#3: Daily Cut-Off
An open position is determined to be an overnight position if it surpasses the daily cut-off period. With daily cut-offs, the forex dealer marks the end of the trading day and starts a new session for the next day. With this, settlement periods and trade dates are properly recorded for accurate accounting.
#4: Swap Fees
For positions held overnight, traders that hold positions are required to pay or earn swap fees. Whether the trader will earn or lose money for an overnight position will be dependent on whether they went long or short on their open position. Additionally, swap fees may also be called rollover fees.
#5: Currency pair
Foreign exchange is traded in the form of currency pairs. This consists of one currency that is being bought and another that is being sold. These currency pairs are made up of the seven major currency pairs, minor pairs, and exotic pairs. A couple of examples of currency pairs are EUR/USD, USD/JPY, NZD/USD, AUD/USD, USD/CAD, and GBP/USD.
How does Forex work?
FX or Forex, short for Foreign exchange, is a decentralized market where a wide array of country’s currencies are traded at fluctuation values that depend on supply and demand. These international currencies are traded by pairs and transacted by contracts involving the underlying currency pairs.
In the past, forex trading was an exclusive service to high net-worth individuals, financial institutions, and government bodies. Nowadays, forex trading can be accessed by regular citizens as long as they meet the certain requirements of their chosen broker.
The forex market is considered to be the most liquid market in the world because of the amount of money that flows through exchanges on a day-to-day basis. Additionally, since it is decentralized, all trades are online and go through financial centers located around the world.
These major financial centers that are responsible for keeping the market running for almost 24 hours for five days a week include Tokyo, London, and New York. As discussed earlier, the forex market is available every day except for Christmas Day and New Year’s Day. A financial center will still be open if their country celebrates a holiday, but traders must be aware that their trading session might have lower volume and participation than usual.
When trading Forex, clients will notice that these currencies are always listed in pairs. Through these pairs, clients will be able to exchange their currency for an equivalent value for another. The movement and price difference in a selected pair will determine whether a client will have a gain or loss in their investment.
A forex pair experiences volatility or change in price for multiple and different reasons. These reasons might include changes in monetary policies such as quantitative easing, federal reserve speeches, or important financial data of a country like unemployment rates and GDP updates.
When dealing with Forex, most clients would prefer to use margin and leverage to experience significant gains that can exponentially increase their growth in their portfolio. Both margin and leverage let users borrow usable capital from their respective brokers in exchange for higher risk.
More than a hundred forex pairs exist on the exchange, and these are classified into three types. These types are major, minor, and exotic pairs.
The major pairs are the most traded assets, including USD/JPY, EUR/USD, and USD/CHF. Minor pairs, much like major pairs, still include the most popular currencies in the world with the exception of USD, such as CAD/JPY and GBP/AUD.
On the other hand, exotic pairs involve currencies that are not commonly traded and have high spreads in exchanges. Currency pairs involving the South Africa Rand (ZAR) or the Turkish Lira (TRY) are considered exotic pairs.
Interested forex traders must be aware that forex trading works a bit differently compared to stock trading. In Forex, assets are counted by lots, and spreads are measured by pips or the smallest standardized unit in a currency pair. Additionally, your broker might charge you swap fees for having an overnight position.
What hours does forex trade?
You can trade Forex 24 hours a day from Monday to Friday. However, it is important to note that the forex market is closed during weekends.
Can you trade Forex on weekends?
Since the forex market is closed during weekends, you can not execute trades during this time. However, you can use this time to do a bit of research, hone your skills, or devise new strategies to better prepare yourself for when the market is open again.
What time does Forex open in South Africa?
The forex market session in South Africa is open between 9 AM and 5 PM on Mondays to Fridays.