The Forex market, short for Foreign Exchange, is the largest financial market in the world that operates 24 hours a day, five days a week. In this market, currencies from various countries are traded with each other.
One of the important aspects of trading on the Forex market is understanding the right trading hours to participate. In this article, we will discuss in detail about Forex trading hours, the division of trading sessions, trading strategies at certain hours, and the factors that affect price volatility.
The Basic Concept of Forex Trading Hours
One of the uniqueness of the Forex market is that it operates 24 hours non-stop. The Forex market starts from Monday morning of the Asian Session to Friday evening of the American Session. To understand Forex trading hours, we must understand the division of trading sessions.
Asian Session
The Asian session starts from Tokyo and runs through Hong Kong and Singapore. The Forex market tends to be quieter during the Asian Session as the majority of participants from the region sleep. However, some currency pairs from Asian countries can experience high volatility.
European session
The European session starts in Frankfurt and runs all the way to London. The European session is one of the most active trading sessions in the Forex market because it overlaps with the Asian and American sessions. Price volatility tends to increase during the European Session.
North American Session
The North American session starts in New York and runs all the way to Chicago. This session overlaps with the European Session for several hours. The North American session is one of the largest trading volume sessions, and price movements can be significant.
Profits and Risks in Certain Trading Hours
Each trading session has different characteristics and levels of volatility, thus providing different benefits and risks.
Asian Session
Advantages: The market tends to be more calm and stable, suitable for long-term strategies.
Risk: The lack of volatility can make price movements tend to be slower and less attractive to some traders.
European session
Advantages: High volatility provides great opportunities for profit in a short time. Economic news from the Eurozone is often released during the European Session, which can affect price movements.
Risk: Large price fluctuations also increase the risk of loss, especially in case of sudden, unexpected moves.
North American Session
Advantages: This session has the highest trading volume, so the market liquidity is high and the spreads are usually smaller. This facilitates order execution and risk management.
Risk: When there is important news or events that occur during the American Session, price movements can be very volatile and high risk.
The Right Forex Pair for Every Session
Not all currency pairs experience the same volatility in every trading session. Some pairs are better suited for trading during certain sessions.
Major Currency Pairs
Major currency pairs such as EUR/USD, USD/JPY, GBP/USD and USD/CHF tend to be active during the European Session and the North American Session due to the involvement of the two major currencies in the pair.
Minor and Exotic Currency Pairs
Minor and exotic currency pairs, such as USD/SGD or EUR/AUD, tend to be more active during the Asian Session due to the involvement of the currencies of Asian countries or other regions that are compatible with the pair.
Trading Strategy Based on Trading Hours
Using a strategy that matches the trading hours can help increase the chances of success in the Forex market.
Breakout Strategy
This strategy looks for opportunities when price breaks a high volume support or resistance level, indicating the potential for a new trend. This strategy is more suitable for use during the European Session and the North American Session which have high volatility.
Range-bound Strategy
This strategy is suitable for use during the Asian Session when prices tend to move within a limited range. Traders can look for opportunities to buy at support levels and sell at resistance levels.
News Trading Strategy
This strategy takes advantage of the volatility that arises from the release of economic news and important events. The European Session and the North American Session are often good times to implement this strategy as a lot of economic news is released during these sessions.
Factors Influencing Forex Trading Hours
Some of the factors that affect Forex trading hours are:
Summer and Winter (Daylight Saving Time)
Some countries implement Daylight Saving Time which can affect the schedule of trading hours, especially in overlapping trading sessions.
Tips for Effective Transactions at Certain Hours
Some tips for trading at certain trading hours:
Understanding the Quieter Asian Market
During the Asian Session, traders are better off focusing on currency pairs that match the characteristics of the Asian market, and using strategies that are suitable for slower price movements.
Take advantage of European Session Volatility
The European session is a great time for traders who like significant price movements and high volatility. However, keep in mind that high volatility also means high risk. Therefore, traders should have a mature trading plan and implement good risk management.
Anticipating a Price Surge in the American Session
The North American session is often the most attractive time for traders due to high transaction volumes and important economic events. However, price volatility can increase dramatically when there are major news releases or high-impact economic events. In this situation, traders must be careful and be prepared for possible sharp price movements.
Economic Events and Headlines
Important economic news releases can affect price movements significantly. Traders should pay attention to the news schedule to anticipate the volatility that may occur.
National Holidays in Various Countries
National holidays can reduce market liquidity because participants from certain countries do not participate in trading.
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