Given the global nature of currency trading, the market is open for business around the clock, 24 hours a day. It is important for the trader to know the times when the major markets are active and how this can be implemented in their trading.
As a general rule, a specific currency will usually be most active when that particular market is open. For example, the GBP and its related pairs, while active and tradable 24 hours per day, tends be most active and widely traded during the hours when the London market is open. Meanwhile the JPY and its related pairs will be more widely traded during the Tokyo business day.
The market hours for the major FX markets are as follows:
London – 3 AM through 12 noon Eastern time (~35% of total FX volume)
New York – 8 AM through 5 PM Eastern time (~20% of total FX volume)
Sydney – 5 PM through 2 AM Eastern time (~4% of total FX volume)
Tokyo – 7 PM through 4 AM Eastern time (~6% of total FX volume)
The above information can be utilized in several ways. The more trades that are being executed during a given time (all things being equal), the narrower the Bid/Ask spreads will be. Greater liquidity results in a narrower spread.
Also, we see that between the hours of 8 AM and 11 AM Eastern US time, the two largest markets (London and New York) overlap one another for about 3 hours. This represents a key trading time slot for many traders. Keep in mind that each trading day will be different from every other and there are no guarantees that this time frame will generate incredible trades on a regular basis. However, with the London and New York markets open and trading simultaneously, more trading opportunities often present themselves.
While we see an overlap between the trading hours of the Tokyo and Sydney markets, it is not as significant as the London and New York overlap due to the significantly lower overall trading volume.
While the FX market technically never closes, virtually all of the major banks and trading entities do close for the weekend. The volume over the weekend is so small that it tends not to offer much trading opportunity for traders. While some activity can occur depending on fundamental news that may occur over the weekend, generally any movement in the currency pairs is negligible, and trading liquidity is extremely thin, making trade execution difficult and spreads very wide. Hence, the FXCM Trading Station closes at 4 PM Eastern time on Friday and opens again at 5 PM Eastern Time on Sunday.
Given differences among traders, some will keep positions open over the weekend while others will close all open positions before 4 PM Eastern on Friday.
You should now have the information that you need to understand trading hours in the currency market.
Written by Dailyfx.com