What is a Forex Market?
The foreign exchange (also known as forex or FX) market is a global marketplace for exchanging currencies.
The Forex Market Basics
Forex refers to foreign exchange and forex trading is about the exchange of currencies
The forex market is essentially the global marketplace upon which all the exchanges of these currencies happen. Any type of investor, be it an individual investor, professional trader, or an institution, who wants to exchange one forex currency for another is active in the forex market.
The forex market is in fact, the largest trading market in the world. It is much larger than any of the global stock exchanges in terms of volume, with more than $ 5 trillion worth of trade taking place daily. Forex indicators are constructive in making disciplined and informed decisions.
How FX Trading works
Trading forex involves the buying of one currency and the simultaneous selling of another. In forex, traders attempt to profit by buying and selling currencies by actively speculating on the direction currencies are likely to take in the future. There are multiple forex trading platforms in the market.
World’s Major Currencies
|Great Britain||GBP||New Zealand||NZD|
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The 4 Major Forex Markets
Around the globe there are four major forex exchange markets, that are in:
- New York
These are the largest trading centers. They account for almost 75 % of FX’s daily volume. The market is open from 10 pm (UTC) on Sunday – when the Sydney session starts – to 10 pm on Friday when the New York session closes for the weekend.
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Forex traders often commit their hours to memory, paying particular attention to the hours when two exchanges overlap. Because during those specific hours when more than one markets are open at the same time, trading volume increases which adds volatility to the market. And this volatility in the market benefits the Forex exchange traders. No doubt it is a surprising fact, as investors usually avoid a volatile market but forex traders prefer a volatile market as it increases their chances of higher earnings.
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Forex Market Trading Hours
Forex market hours run 24 hours a day during the week, but the market is closed on weekends. This continuous trading is only possible because forex is traded all over the world in decentralized venues.
The opening time of the forex market depends on which of the four forex trading sessions you are interested in. The forex market is fully electronic and opens somewhere in the world between 5 p.m. Sunday and 4 p.m. Friday, Eastern Standard Time (EST).
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Each region has major exchanges with unique trading hours from Monday through Friday. The below table describes the opening ties of each exchange according to local hours and EST:
|Forex Session||Open/ Close||Local Time||Eastern Standard Time (EST)||Coordinated Universal Time (UTC)|
|Sydney||Opening Time||7 am||5 pm||10 pm|
|Closing Time||4 pm||2 am||7 am|
|Tokyo||Opening Time||9 am||7 pm||12 am|
|Closing Time||6 pm||4 am||9 am|
|London||Opening Time||8 am||3 am||8 am|
|Closing Time||4 pm||12 am||4 pm|
|New York||Opening Time||8 am||8 am||1 pm|
|Closing Time||5 pm||5 pm||10 pm|
An important note here is that the opening and closing hours of the forex market also vary based on the time of the year, as some countries practice daylight savings. There is a vast array of forex trading courses available online that you can join, each with its own merits and every course suitable for different types of traders.
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Best Trading Hours in the Forex Market
The best time to trade in the forex market is when the market is fully active. During these hours, investors will get the narrowest spreads and maximum chances of executing trades at their desired levels. Usually, the forex market is fully active when market hours overlap between sessions. The reason is that during these hours the frequency of trades increases. Investing in fintech stocks is a smart investment move today.
The overlap windows for exchanges are:
- 1 pm to 4 pm (GMT) when both New York and London exchanges are open
- This is one of the most important and active exchanges for forex. Because these two centers account for almost half of all forex trades.
- 12 am to 7 am (GMT) when both Tokyo and Sydney exchanges are open
- 8 am to 9 am (GMT) when both Tokyo and London exchanges are open
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Despite all, the best time for forex trading is also highly dependent on the currency pairs investors are trading. According to the trade frequencies, the most liquidity for each FX pair will occur when the sessions for the pair overlap that is if both locations are open at the same time. Let us discuss an example to better understand. You are trading the currency pair GBP/USD. The best time to trade this currency pair is when both London and New York sessions are open. However, it is important to note that high trading frequency also means high volatility. Therefore, it is always better to trade during these hours with extra caution while having a good risk management strategy.
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Forex Trading is Risky during High-Trading hours
Forex trading is risky. New investors should always practice with demo accounts. It is advisable to open accounts with companies that offer demo accounts and let investors practice with mock forex trades. This helps traders recognize market volatility and enables them to handle gains and losses. This prepares the investors for real forex trading and to trade during high-volume trading hours.
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To start forex trading, investors must open an account with a forex broker with an initial deposit. For beginners, it is advisable to practice with demo accounts to get a hang of forex trading before actually putting real money at stake.
The ability to make money trading forex depends on the proportion of trades the investors benefit from and the size of your profits. The time investors spend usually is not important.
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