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The foreign exchange market is variously designated as forex, currency market, or FX in financial circuits. Unlike securities exchange analogues, currency trading is conducted via a network of decentralized markets. A handful of international financial centers serve as forex “anchors.”
A combination of several key factors serve as significant distinctions between the currency exchange industry and similar monetary markets. Chief among these are:
- High liquidity due to enormous trade volumes;
- Wide geographical distribution;
- Extreme volatility affects specific exchange rates;
- Relatively low profit-income ratio; and,
- Continuous 24-hour operation.
The last of these factors is a frequent source of confusion and frustration for novice money changers. In the context of currency trading, “24-hour operation” carries very different connotations than its ordinary implied definition.
Novice traders often believe that they may conduct exchanges anytime they wish. Although technically true, some terminology clarification is appropriate.
Rather than non-stop activity at a central location, “continuous trading” denotes the perpetual existence of exchange opportunities somewhere in the world.
Due to wide international time zone dispersion, one or more currency exchange markets is always open. When one market closes, another is actively trading elsewhere. It is imperative to understand this concept, as some hours offer superior exchange profitability.
Generally, the best forex opportunities occur during times of high trading volume. During those hours, currency exchange traders may fully exploit all the benefits that forex has to offer. The ideal time to initiate trades is when numerous nations are simultaneously trading.
Standard business hours are 8 AM to 4 PM in most forex markets. Discerning the time of day in during which trade volume is highest enhances profit. Slower market conditions offer few chances for profitable currency exchanges.
Major forex market hours are as follows:
New York – trades from 8 am to 5 pm EST
Tokyo – trades from 7 pm to 4 am EST
Sydney – trades from 5 am to 2 am EST
London – trades from 3 am to 12 noon EST
Thus, for a US East Cost resident, two obvious overlap times are:
New York and London – from 8 am to 12 noon EST
Sydney/Tokyo – from 7 pm to 2 am EST
London/Tokyo – from 3 am to 4 am EST
Many investment-oriented websites feature free application downloads that determine maximum forex profitability for any of the world’s local time zones. Find them very easily with a search engine query for “forex trading hours.”
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