The 24 Hour Forex Market
Updated: March 21, 2013 at 11:44 AM
One of the main reasons the forex market has become so popular, especially now that retail accounts are available for online trading via forex brokers, is the fact that the market trades continuously 24 hours per day, five days a week.
Basically, you can start trading at the Sydney open on Sunday at 5 PM EST and then trade forex 24 hours a day until 5 PM EST on Friday when the market in New York closes.
In addition, a live order to execute a forex trade can be left with your broker which can be an active order all week.
This allows for the forex market to trade at the right level to fill your order at, no matter what time of the day or night it is.
Trading Stock Versus Trading Forex
A GTC or Good 'Til Cancelled stock order must lie inactive every night until the broker goes in to work the next day on the exchange where the order was originally taken. The order stays with the broker and does not go to a global network for execution on another exchange somewhere else in the world.
A forex order, on the other hand, can be kept track of as the order follows the market around the world. For example, assuming a trader places an order to sell Euros against U.S. dollars at 1.2500 and enters the order at 10:00 AM EST.
The market is trading at 1.2350 when the New York session closes, but the broker places the open order with their California office which then passes it on to the Sydney, Australia office.
The order continues being passed around the world through the broker's offices in Asia and the Middle East to the open in London, until the order lands back in New York, if not filled overnight.
The order can even go around the world all week long if the market does not trade in the desired range. Nevertheless, a sudden sharp move can fill the order, which is the sort of price action that some forex traders bank on. Read a lot more on forex price actions here.
Most Active Forex Trading Periods
The busiest forex session with the most liquidity is the overlapping European session when the United States market opens at the beginning of the New York session and joins Europe, which is at the end of their trading day. The two markets are both open for four hours of trading between 8 AM EST and 12 Noon EST.
As the U.S. market closes in New York, the markets in Australia and Asia begin to open, with Sydney and Tokyo overlapping between 7 PM and 2 AM EST.
Moving further on in time during the trading day, Tokyo then overlaps with London between 3 AM and 4 AM EST.
When more than one market is open at the same time, a larger volume of trades and a greater level of liquidity usually exist. These conditions often give a forex trader a better opportunity to profit in the market.
The cycle then repeats every weekday until the close of business on Friday at 5 PM EST.
The Forex Market Never Closes
Holidays in the forex market are at best partially observed. When one country is celebrating a holiday, generally other countries may not be, as is often the case with national or religious holidays.
Also, because of the differences in cultures, while a bank holiday can be observed all over Asia for example, the forex market will usually be open in Europe and the United States.
This can either present opportunities for some traders or times to avoid trading for others, depending on the trading style you employ.
Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.