Why 24-hour Forex Trading?

Stock and commodities markets are open for a limited amount of time each day, typically not even a full 8 hours. But the global Forex markets are open and trading 24 hours a day, from Monday to Friday. The FX market does take a break over the weekend however, so you could say that it trades 5 days a week. Specifically, it is open from 10:00pm GMT on Sunday until 10:00pm GMT on Friday. While there may be some lower volume times over the course of the 24-hour cycle, there are always traders participating in the market to meet the demands of the buyers and sellers of various currencies.

So, traders are able to buy and sell currencies 24 hours a day, all week long, without a break. The reason that the Forex market remains open for 24 hours is that it is a global market. It has to meet the needs of traders in Cairo, Chicago, and Canberra equally, and because of the different time zones around the world, the Forex market remains open.

Forex markets are able to remain open for 24 hours because it is a decentralised market. That means it doesn’t have a single physical location, like the New York Stock Exchange does, for example. The Forex market is comprised of various computer networks around the world, most of which are controlled by banks or brokers. This makes Forex trading very convenient, no matter where in the world you live.

Who Trades in the 24-hour FX Market?

Around the world, there is always a need for currencies. From central banks to corporations and down to the common man, there is always a need to transact in currencies. After all, money is what makes the world go round, isn’t it? For five decades, the central banks of the world have relied on the FX markets to provide for the ability to exchange one nation’s currency for another, facilitating global trade. Each day sees the Forex markets begin the trading day in Australia, followed by Asia, then by Europe, and finally by North and South America.

And the merry-go-round simply continues all week. As trading closes in one region, it begins in another in a 24-hour cycle. As it comes to the final hours of trading in North and South America, a new day is just beginning again in Australia and New Zealand, and the cycle repeats.

No single day is the same as any other in the Forex market, either. Economies around the world are in a constant state of change, and political changes can also have an impact on the relative value of currencies. Central banks will make changes to monetary policies in order to stabilise their country’s currency. Companies will buy and sell currencies to conduct foreign trade and to pay for employees located in different countries around the world. Because we have a global economy, we also have the need for a Forex market that operates 24 hours a day to accommodate the needs of governments and businesses in every corner of the globe.

Does 24-hour Forex Trading Truly Occur Everywhere?

Surely there must be some area of the world where Forex trading isn’t always happening? In fact, there is no area without 24-hour Forex trade. Because the Forex market is completely digital, there’s no physical exchange of currency notes in Forex trading; it can occur at any time of the day or night. All that’s required is a connection to the Forex networks.

When are FX markets most active?

If you are going to trade currencies, it is important to know which times are the most active in the FX markets. These are the best times to trade because the liquidity at these times lowers trading costs, and price moves are more pronounced during these times. These are the periods of time when major central banks and corporations are participating in the market, bringing trillions of dollars in liquidity. Forex trading in major financial centres around the world follows this schedule:

  • In Australia, trading begins in Sydney at 10:00 pm GMT. Trading there will last until 6:00 am GMT.
  • Trading comes online next in Tokyo at 00:00 am GMT and lasts until 9:00 am GMT.
  • After that, London opens at 8:00 am GMT and trade continues through 5:00 pm GMT.
  • Finally, New York opens at 1:00 pm GMT and trades until 10:00 pm GMT< when the cycle resumes back in Sydney.

During the 24-hour cycle of trading, the busiest times are the crossover between London and New York from 1:00 pm GMT until 5:00 pm GMT. These four hours of the day account for the majority of the $6.6 trillion traded each day in the Forex markets. One of the reasons for this is the vast amounts of money held by London and Wall Street fund managers. Many of these also use the daily spot foreign exchange rate for their daily valuations, and this is printed at 4:00 pm GMT each day by Reuters/WMR.

The eight major currencies of the world, and those that see the most trading volume, are the Euro, the U.S. dollar, the British Pound, the Swiss Franc, the Japanese Yen, the Australian dollar, the Canadian dollar, and the New Zealand dollar. All of these trade continuously throughout the 24 hour cycle. While the Forex market remains open 24-hours, the currencies of some smaller emerging economies might not trade 24-hours a day because there simply isn’t enough demand for them.

Most speculators will focus on the pairings of the seven major currencies throughout the day, focusing on the times when each country is open for the bulk of trades. So, for example, during the Australian session is when the bulk of the Australian and New Zealand dollars are traded, and when the price is most liquid. The same is true of the Japanese Yen and the Canadian dollar. The other 2 pairs, the Euro/U.S. Dollar, and the British Pound/U.S. Dollar  are somewhat different since they always have demand globally.

Traders prefer to trade when the volumes in their pairs are highest since that also makes the spread smaller, reducing their trading costs. Institutional investors also prefer to trade during the high-volume hours since it increases the liquidity and availability of currencies.

Despite how decentralised the Forex market is, it remains a highly efficient market and is quite effective in maintaining stability in the global trade network, beside also the forex taxation. It is also quite effective as a speculative market for participants flung all across the globe.

Forex traders are well aware that the Forex market has the potential to deliver potential profits at any time of the day or night (although losses can also occur). That’s why for them is very important to build a solid forex trading model. While it is home to central banks, massive institutions, and corporations, it is also welcoming to the beginning retail trader with limited resources. In the FX market, everyone is welcome.

In Conclusion

Currencies allow for trade on every level, from the small town marketplace to international trade agreements. Central banks and corporations require currencies as a means of exchange, and they need access to all the different currencies on a 24-hour basis if they can be expected to carry on trade all around the world and in all the different time zones.

The attraction of the Forex market is that currencies can be traded 24 hours a day. Those who are able to grasp the Forex markets and develop trading strategies around the movements of the world’s currencies have the opportunity to create profitable trades. Of course, the Forex market isn’t without risks, and losses can also occur in this highly leveraged financial market. Yet that doesn’t discourage those who appreciate the 24-hour nature of the FX markets and the possibility of generating success as a Forex trader.

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