Brokers claim you can trade Forex 24/5. Of course, you can, but it’s rather marketing saying than reality. During some hours on particular pairs, basically, there is no liquidity, therefore trading is hardly possible. In this article I want to talk about forex opening hours, sessions, volatility on particular trading hours and bit more.
Opening hours and trade sessionsThere are three major Forex sessions :
– American session
– European session
– Asian session
Time zonesBefore talking about opening hours and overlapping of trading sessions, it’s essential to clarify world time zones. Most important time zone is GMT – Greenwich Mean Time. Named after Royal Observatory in Greenwich in 1884 was declared that this place will bear zero degrees longitude and established the 24 time zones.
Most used time zones in Forex:
GMT – Greenwich Mean Time – London 00:00h
JST – Japan Standard Time – Tokyo +09:00h
AEST – Australian Eastern Time – Sydney +10:00h
EST/EDT – Eastern Standard/Daylight Time – Ney York -05.00h/-04:00h
We defer Standard time (beginning of November – beginning of March) so called winter time. Daylight saving time (beginning of March – beginning of November) is summer time. During Standard time (winter) time difference between London and New York is -5 hours. In Daylight saving time(summer) difference is just -4 hours. We can conclude that during summer time we switch our clock one hour back.
Last time zone is LINT – Line Islands Time +14:00h. It’s islands in Pacific ocean close to Hawaii. Between these bunch of islands is a line which divides +zone and – zone. Time of day is the same as in Hawaii, but the date is one day ahead.
Now when we defined time zones, we can set opening hours.
Volatility is dependant on opening hours and overlapping of Forex sessions. I trade EUR/USD as my main pair and I can say the market is most volatile during London (European) session. (2 A.M.–12 P.M. EST – New York time). London is the most important Forex hub with approximately 30% market share. Most world banks have dealing desk in London and many huge transactions occur in London session. As we can see on the table below, 6 of the major pairs surpass line 80, which is not observable at other sessions.
From the table is obvious that pairs GBP/JPY and GBP/CHF are the most volatile ones, therefore traders can generate simultaneously highest profit, but highest loss as well.
American session (8 A.M.–5 P.M. EST New York time) is slighty behind London. With approximately 19% of market share trades might expect volatile market full of generous moves.
With around 120 pip range are pairs GBP/JPY and GBP/CHF most volatile options. They are slightly less volatile than during European sessions but still strong enough to generate nice profit.
The least volatile is Asian session. Asian session consists of Tokyo hub, which is biggest in this region according to market share, followed by Hong Kong and Singapore.
U.S.–Eeuropean overlap: 8 A.M.–12 P.M. EST offers traders nice volatile market. The range of trading between 8 a.m. and noon EST constitutes on average 70 percent of the total average range of trading for all of the currency pairs during the European trading hours and 80 percent of the total average range of trading for all of the currency pairs during U.S. trading hours.
European – Asian overlap: 2 A.M.–4 A.M. EST is much less volatile. It’s caused by slow trading during the Asian morning.
I’d like to show you two comprehensive tables showing sessions overlapping and volatility.
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