One of the benefits of trading the forex market is it remains open 24 hours a day, 5 days a week. This allows financial institutions and individual traders to buy/sell currency pairs at any time. The market stays close on the weekends and holidays like Christmas and the New Year.
Due to Earth’s multiple time zones, a trader sitting in Auckland can initiate a trade, whereas the American trader is still sleeping. And that’s how forex is a 24-hour market.
Currency pairs behave differently in different market cycles. These cycles are known as forex trading sessions.
These sessions determine the most liquid and most volatile currency pairs. Further, these trading sessions compromise forex market hours, which traders monitor for the market’s movement. For example, the EUR/USD is usually more active during American and European trading sessions.
How do Forex Market Hours & Trading Sessions work?
Here’s a brief description of how trading sessions work:
The forex trading begins in New Zealand, representing the Pacific trading session, which starts at 10 p.m. GMT. After that, the Asian trading session begins at 11 p.m. GMT. Next, comes the European trading session, where trading opens at 7 a.m. GMT. The last session in the forex market is the American Session, which commences at noon GMT.
Now let’s find out more about these forex trading sessions.
1. Pacific trading session
The Pacific session is also known as the Sydney trading session. The New Zealand Dollars and the Australian Dollars are the main traded currencies during this session.
The popular pairs are NZD/USD, AUD/NZD, NZD/JPY. Major currency pairs such as EUR/USD or GBP/USD may not show significant movement compared to other trading sessions.
The Pacific session is regarded as one of the calmest in forex trading sessions.
2. Asian trading session
After forex trading resumes on Monday, the Asian session is the one that sees the early action. The session is also known as the Tokyo session. JPY is the most traded currency. Traders combine JPY with other currencies during this session.
However, there are other notable currencies in the Asian market, like the Chinese Yuan, Russian Ruble. Due to the involvement of these currencies, the Asian trading session stretches beyond the Japanese Yen.
The session closes at 8 a.m. GMT.
3. European trading session
As the Asian session ends, the market slows down a bit. But when the European session starts, the market usually sees a high level of activity.
London is the dominant market, defines the European trading session. Before the official opening of trading in the U.K, the European session starts in France and Germany.
The session is considered one of the most active as it contains three of the strongest currencies; EUR, GBP, and CHF.
Major currencies pairs like EUR/USD or GBP/USD, USD/CHF get the most response from traders.
The European session runs between 7 a.m. GMT to 4 p.m. GMT.
4. American trading session
When the American trading session initiates, the Asian trading session closed four hours ago. However, the European session is halfway through.
The American trading, a.k.a. The USD dominates the New York trading session. The popular pairs during the session are; GBP/USD, USD/CAD, AUD/USD.
The session closes at 8 p.m. GMT.
What does a trader need to look for?
One thing that a trader should put special heed on is the session overlaps. The Asian and the European session overlaps at 7 a.m. GMT while the European and the American session overlaps at noon GMT.
This overlapping creates more volatility due to high trading activity. Volatility is important for short-term traders, seeking short-term moves. However, this can all depend on the trading strategy being used and individual needs of forex traders.
Best trading hours
Although the forex market is a 24-hour market, not every hour is suitable for trading. The best hour or time to trade is when the market is when it suits the trader and what works for them. Every trader is different so it is important to trade at a time and with a strategy that you feel most comfortable with.
Forex Market Hours & Trading Sessions Conclusion
By observing a currency pair in different sessions, a trader can develop a trading strategy. The American and the European sessions are usually the most active, especially when they overlap.
Becoming a successful forex trader can take many years of practice. It is not easy to make a living from forex trading in my opinion. It will require immense trading discipline, good money management, and a bullet proof trading plan.
Furthermore, I would combine multiple technical analysis, fundamental analysis, price action analysis and sentiment analysis to filter all forex trading signals whatever forex strategy I was using.
The methods of trading forex that are outlined within this article are just ideas. You should trade forex in a way that suits your own individual style, needs and goals.
If you would like to practice forex trading online, you can open an account with a forex broker and download a trading platform completely free of charge. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration.