Trading hours and their use in forex tradingPosted by FX trader
A well known thing that attracts new traders towards forex trading is the hours of operation and it is made popular as a twenty four hour market. New traders join the forex market hoping to earn a lot more than they would in other markets by utilizing more time in trading. But it is worth mentioning here that the actual market hours are not what they are marketed as and new traders need to become aware of it.
Forex Trading ֠3 Sessions
Overall the trading hours in forex market are divided into 3 sessions. These 3 sessions are known as US, Asian & lastly the European sessions. As you can figure out, the main activity primarily takes place in these regions. At the time of Asian session you will find Asian markets to be more active and likewise happens during European & US sessions.
All the three sessions overlaps onto subsequent session which means that during that time 2 sessions remain active simultaneously. At these times when sessions overlap you will notice a lot of activity as more people are involved in forex trading during these times.
Trading in forex market starts with in Australia, Sydney right on evening of Sunday and closes on Friday with the close of trading in New York. Thus the market remains open twenty four hours but it is necessary for you to understand the benefits this will have for you as a forex trader.
You should know that market remains open all day but it is less active at certain times. As for example, period between opening of Sydney market & closure of New York market is quite dormant if you compare it with trading volume at any other time plus liquidity is also very thin during this time.
Higher Spread Amount
At the time of such low trading activity the spread amount is high and can be almost four to five forex pips for any pair like AUD/JPY currency pair. This kind of high spread results in generation of false signal enticing people to trade and may well trigger pending purchase orders resulting in losses for a trader.
Ideally trading while the market is active as well as volatile is advisable. You will find the markets to be more volatile during ending part of each of the 3 sessions. During other periods of the day the market is quite subdued and you will not achieve trading results as expected.
As it is clear from the above discussion, you will find that the forex markets remain open all day but you will have to know all the finer details about the market. You will become aware of these finer details after spending more time trading and till that time you should take help of forex softwares to trade.
A Final Note
We would conclude here by saying that knowing the best time to trade will help you maximize your returns as well as help you prevent losses due to generation of wrong forex signals.