Forex Market Hours Definition

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Forex Market Hours Definition

What Are Forex Market Hours?

Forex market hours are the hours during which participants in the foreign currency market may deal.

Key Takeaways

  • Forex market hours are the hours during which participants in the foreign currency market may deal.
  • Except on weekends, the currency market is open for business 24 hours a day.
  • The forex market is decentralized and driven by four major sessions: Sydney, Tokyo, London, and New York.
  • Trading volume fluctuates from session to session, with the biggest trading activity occurring when the London and New York sessions coincide.
  • The benchmarkspot foreign exchange rate, which many money managers and pension funds use for daily appraisal and pricing, is determined at 4 p.m. London time.

Understanding Forex Market Hours

Forex market hours are the times when players in the forex market may buy, trade, exchange, and speculate on currencies all over the globe. During the week, the FX market is open 24 hours a day, however it shuts on weekends. However, time zone fluctuations compress the weekend.

The FX market starts in New York City on Sunday at 5 p.m. local time. It shuts at 5 p.m. on Fridays and reopens 48 hours later to begin the new week. When the forex market is open, traders from all around the globe may execute deals, however trading circumstances may differ.

Forex trading begins in New Zealand but is referred to as the Sydney session.

Banks, commercial enterprises, central banks, investment management organizations, and hedge funds, as well as retail forex brokers and investors from all over the globe, make up the international currency markets. Except for the weekend, this market may be accessed at any time since it runs in various time zones.

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The international currency market is controlled by a worldwide network of exchanges and brokers rather than a single main exchange. The forex market trading hours are determined by when trading begins in each participant nation. While historical periods overlap, it is widely assumed that the following are the most active for each region:

  • 8 a.m. to 5 p.m. in New York (EST)
  • Tokyo: 7 p.m. to 4 a.m. (EST)
  • 3 p.m. to 12 a.m. in Sydney (EST)
  • 3 a.m. to 11 a.m. (EST) in London

Image by Sabrina Jiang © Investopedia2021

London and New York have the busiest time zones. The time when these two trading sessions overlap (London afternoon and New York morning) is the busiest and accounts for the bulk of volume traded throughout the day, with billions of dollars changing hands.

The Reuters/WWM benchmarkspot foreign exchange rate is calculated during this time period. Many money managers and pension funds utilize the rate, which is determined at 4 p.m. London local time, for daily valuation and pricing.

Special Considerations

While the currency market is open 24 hours a day, several currencies in some developing nations are not.

The world’s seven most traded currencies are the US dollar, euro, Japanese yen, British pound, Australian dollar, Canadian dollar, and Swiss franc, which are all exchanged continually when the forex market is open. Speculators frequently trade in pairings that cross between these seven currencies from across the globe, albeit they prefer higher volume times.

When trading volumes are high, forex brokers will provide narrower spreads (bid and ask prices that are closer together), lowering transaction costs for traders. Similarly, institutional traders prefer periods with greater trading volume, however they may tolerate bigger spreads in exchange for the ability to trade as soon as feasible in response to fresh information.

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Despite the forex market’s extremely decentralized design, it remains an efficient transfer mechanism for all players and a global access method for those who seek to speculate from anywhere on the planet.

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