Understanding forex trading hours before jumping into the forex market is the most crucial piece of knowledge to have as a trader. In forex trading, currencies are traded at their relative values in the forex market to make money out of them. And time plays the most important role in this expeditious market.
Forex trading is the largest financial market which deals with over 6.6 trillion dollars everyday. However, this trading market does not have any bodily existence. Rather, it is wholly carried out by electronic devices throughout the world. The forex market never sleeps; it is active 24/7, five business days a week. The biggest forex trading sessions are located in New York City, London, Tokyo, and Sydney.
It is necessary to have well-thought-out strategies before entering the forex trading market. Perfect timing brings success here. Understanding the best hours for forex trading and when to enter is the core goal of every trader. But it is tough to comprehend.
Best Hours to Enter Into Forex Trading
Overlapped Forex Exchange Market
Although currency exchange happens throughout the week, however, the golden hour to enter is when more than two of the four markets are open. At the time, multiple forex markets are on the run; the trade overlaps and is the most active.
For example, the New York market opens at 8 a.m. EST and the London market closes at 12 a.m. EST. There is a 3-hour opening period for the two biggest markets simultaneously. This time, it is wise to enter the market. Due to intense liquidity, a large number of currencies float at this time. Due to intense liquidity, it is very unpredictable to address near-future positions. Nevertheless, the higher the risk, the greater the profit.
Here is the collected data from the opening of the two sessions below,
1. Tokyo and London overlap from 3 a.m. to 4 a.m. EST.
2. London and New York overlap from 8 a.m. to 12 a.m. EST.
3. Sydney and Tokyo from 7 p.m. to 2 a.m. EST.
When many markets open at the same time, this is the best time to get into the forex trade.
The U.S. dollar controls 90% of all currency trades. Therefore, USD pairs are the best currencies to initiate a forex trade. The EUR/USD currency pair is the biggest by volume, representing two major economies in the world. Some of the other popular pairs are USD/JPY, connecting two leading economies in the world; AUD/USD; EUR/AUD; AUD/JPY; AUD/NZD; NZD/USD; and NZD/JPY.
Hours of High Liquidity in Forex Trade Market
Now, is trading on all five days of the week recommended to ensure a profitable trade?
NO. No one can ensure the utmost accuracy in this floatable forex market. However, the historic analysis speaks of the peak liquidity days for trading. The volume starts to increase on Monday afternoon or Tuesday morning. And it slows down late on Thursday. The market is highly active from early Tuesday to Thursday.
Whenever the forex sessions overlap and however much the trade position moves internally, the entire process is highly dependent on fundamental forces. These are the news, also known as economic reports and national announcements about the state of the economy and politics.
The unemployment rate is another major issue that has influenced the forex market for a long time. If the rate is lower than expected and there is not enough GDP growth, that will increase interest rates due to the heavy consumption. In this way, high interest rates directly affect the forex market, attracting global investment.
Major remarks on forex trade are created by the Central Bank’s reports and budget meetings. Along with the mentioned influences, simple matters like national holidays, period of the crossover on late Sunday are time to hold the trade.
Suggestions for Beginners in Forex Trading
To enter any market, background knowledge and a minimum strategy are required to hope for a profit. Therefore, as a beginner in forex trading, one must have some knowledge and practical experience. Many firms provide demo platforms for the keen learner. This helps to understand the basics of the trade strategies.
It is necessary to initially invest time and energy in the forex market in order to receive benefits out of it. For beginners in this high-risk market, understanding the market and grasping fundamental and technical analysis for a better prediction would be highly recommended to begin the journey.
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I particularly liked the section on notable influences on the forex market, such as economic reports and central bank meetings. This gives a broader perspective on the forces at play in the market and highlights the need for traders to stay informed and up-to-date on global events.