The foreign exchange is unique in the financial market, as it remains accessible to investors 24-hours a day and six days a week. This is just one of the reasons why the market is so lucrative, with an estimated $6 trillion now traded every single day globally.
Interestingly, the 24-hour forex market is broken down into three geographical sessions: namely the North American, European and Asian sessions. Traders often focus on one of these sessions, while peak activity tends to occur in instances where these time frames overlap to create a spike in trading volumes.
In this post, we’ll look at each of these trading sessions in further detail, while identifying overlaps and the key time frames for leveraging market volatility.
1. The Asian Forex Session.
We’ll start with the Asian trading session, which is officially represented from the Tokyo Stock Exchange and run from midnight to 6am GMT.
However, the Asian market encompasses more than 40 individual states and nations, including China, Australia, New Zealand and even Russia. As a result, the Asian session unofficially runs from 11pm until 8am GMT, and this creates additional opportunities and often increased volatility for traders.
Interestingly, this also creates a one hour crossover at the beginning of the European session, which is great news for traders who want to leverage high-demand pairings such as the GBP/JPY.
So, whether you’re interested in forex trading in Singapore or targeting currencies in the Asia-Pacific region, this session may be ideal for you.
2. The European Trading Session.
This brings us neatly onto the European session, which unofficially runs between the hours of 7am and 4pm. The dominant London Stock Exchange is open between the hours of 7.30am and 3.30pm, and this session is considered to be one of the most dense and widely traded across the globe.
This period undoubtedly sees the highest trading volumes on a day-to-day basis, with both the Euro and the British pound prominent during the session.
As we’ve already touched on, the highly liquid GBP/JPY pairing is also incredibly popular during the first hour of the unofficial European session, particularly amongst investors with a long-term outlook.
The dollar also features heavily during this session, which should come as no surprise given the dominance of the greenback and the volatility provided by pairings such as the USD/GBP.
3. The North American Trading Session.
We close with the North American trading session, which is underpinned largely by the iconic New York Stock Exchange. Once again, this session is dominated by the USD, although the currencies of Canada, Mexico and Brazil also feature prominently during this period.
In unofficial terms, the NA trading sessions commence at 12pm GMT, before closing at 8pm. This creates a striking, four-hour crossover with the lucrative European session, during which time trading volumes peak and volatility levels begin to soar.
As you can imagine, pairings such as the USD/GBP and the dominant USD/EUR see huge spikes in demand during this four-hour window, while it’s interesting to note that the closure of the New York Stock Exchange ushers in a brief period of calm and reflection amongst traders.
Financial futures and commodities also see a considerable uptick during this time, which is good news for investors with a broad and diverse portfolio.