Trading sessions are certain time periods during which trading floors in different countries actively operate.
The foreign exchange market is open 24 hours a day, five days a week, except for the national holidays. Saturday and Sunday are days off like in most banks.
Weekends are time for unofficial forex markets, but trading during these days is highly risky because there are fewer participants on the market that increases a possibility of short-term currency fluctuations, since client orders are executed by one or several large banks located in another region.
Forex markets are located in different geographical areas. The beginning of one trading session always coincides with the end of another, that way the market operates 24 hours a day.
There are four major trading sessions: American, European, Asian, and Pacific.
Why is it important to know forex trading hours?
1. Knowing the trading hours, you can manage your own time more effectively.
2. Each session has its own specific features that can be used to increase your trading performance.
3. When forex sessions overlap, a trading volume reaches its peak. It is a period of the most active trading.
Characteristics of trading sessions
The American session has the highest liquidity, since it is the last trade of a day. When traders of New York, the financial capital of the world, start to work at 13:00 (UTC), London traders return from their lunch breaks to continue trading. It is time when the most influential fundamental news and the most important statistics are released. The end of the European session brings volatility to the market. The American session is considered to be the most aggressive one, but its trading volume is much smaller than in the European trade. The most actively traded pairs are EUR/USD, GBP/USD, USD/CAD, USD/CHF, GBP/CAD.
The European session opens at 8:00 (UTC), when the Asian trade gradually comes to an end. The financial center is London as its working hours overlap with other three major trading sessions. The London trading floor has the biggest trade turnover in the world. The European session reaches its peak of activity within the first two or three hours. After that, the market slows down. The most popular currency pairs are EUR/USD, GBP/USD, EUR/GBP, USD/CHF, GBP/CHF, GBP/JPY.
The Asian trade starts at 23:00 (UTC) in Tokyo, then Singapore and Hong Kong joins in. By the end of the Asian session, the Bank of Japan enters trading floor, which triggers a sharp increase in the volume of deals on currency pairs with the yen. The trading activity is moderate, the most popular pairs are USD/JPY, GBP/JPY, AUD/JPY.
The Pacific session, the slowest one, opens on Monday at 22:00 (UTC). A trading day starts in New Zealand and Australia. The financial center of the Pacific trading is located in Wellington, but its trade turnover is very low. Trading becomes more active when Sydney joins in. Due to low trading activity, market participants often combine the Asian and the Pacific sessions.
Best time for forex trading
The same currency pairs can be active or passive during different sessions. Therefore, to gain profit from trading, it is necessary not only to understand principles of foreign exchange market operation but also to know work hours and even lunch breaks of dealers at a particular trading floor. Being aware of the trading hours, you can determine the best trading period for currency pairs you are interested in.
Thanks to a special indicator in the trading platform, you can always know forex trading hours. Install it and you will be notified of the beginning and end of each session. However, this indicator is redundant for those who trade on the four-hour time frames, or open and close within daily candles.