The Forex Trading Sessions Explained

The Forex market is the largest financial market in the world, with an average daily trading volume of more than $6 trillion! To stand a chance of being successful, there are many things to familiarise yourself with, including the basics such as Forex trading hours and how the market can be impacted by the different trading sessions.

In this article, we will look at the Forex market hours, analyse the different Forex trading sessions and much more!

The Forex Market Hours

One of the biggest draws of the Forex market is the fact that it can be traded at any time of day during the week. Yes, that’s right. The Forex market is open 24 hours a day, five days a week!

The international currency market is not actually dominated by a single market exchange but, instead, entails a global network of exchanges and brokers throughout the world. Consequently, Forex market hours are based on when trading is open in participating countries.

During the week, trading is always open somewhere, with the result being that, after the Forex market opens on Sunday evening, it doesn’t close again until Friday. This means that Forex traders can access the market around the clock!

The 4 Major Forex Trading Sessions

Forex trading times can be broken up into four major trading sessions, the names of which are typically taken from the city with the major financial hub in the relevant region. If you are looking at the best time to trade Forex, it is important to understand the different Forex sessions and the impact they can have on trading.

The trading day actually begins each weekday in New Zealand, although it is the city of Sydney which lends its name to the first Forex session. The pattern then tends to follow that, as one major Forex market approaches its close, another one opens. Certain times of the day are more active than others and it is important to keep track of these.

In the coming sections, we will examine the three most important Forex sessions and the best times at which to trade them in more detail. But first, let's look at the different Forex session times throughout the year.

What Are the Forex Session Times?

To confuse things ever so slightly, due to the observation of daylight saving, the Forex session times vary with the seasons depending on where you are. Out of the four major Forex trading sessions which we identified above, only Japan keeps things straightforward all year round and does not change their clocks.

Spring/Summer in the Northern Hemisphere

Below are the Forex market hours for each trading session in both GMT and local time.

Autumn/Winter in the Northern Hemisphere

The table below shows the major Forex market hours in local time and GMT.

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The Peak 3 Forex Sessions

Although the Forex market is open for trading throughout the week, not all times are created absolutely equal. There are times when price action is highly volatile, and others when it is very muted.

Typically, although we previously identified four major trading sessions, three of these Forex sessions tend to be the busiest. These peak sessions are the Tokyo, London and New York sessions, which are also known as the Asian, European and North American sessions respectively.

The markets are most active when these three financial powerhouses are conducting business - as the majority of banks and corporations make their daily transactions and there is a larger number of speculators online.

Although currencies can be traded anytime you wish, a trader cannot personally monitor their positions for such long periods of time. There will be Forex trading hours when opportunities are missed or when an increase in volatility causes the market to move against your position.

To reduce such a risk, most traders will usually focus on one Forex trading session. In order to decide what is the best time to trade Forex, a trader needs to be aware of when the market is at its most volatile and how this fits in with their individual trading strategy and style.

Let's take a look at each one of these peak Forex sessions in a bit more detail.

The Tokyo Trading Session

Following the weekend, action returns to the Forex market in the form of the Asian trading session. Although not officially, activity from this part of the world is largely generated by the Tokyo markets, which is why the session bears its name.

Nonetheless, there are a lot of other locations with considerable pull that are present during this period - including Australia, China and Singapore.

Despite the large amount of transactions taking place, liquidity can sometimes be low during the Tokyo session, especially when compared to the London and New York sessions.

The London Forex Session

Later in the trading day, as the Asian Forex session is winding down, the European session takes over in keeping the currency market active.

This time zone is very dense and involves many key financial markets. However, it is London which takes the honour of identifying the boundaries of the European session.

Largely due to its favourable time zone - London is not only the centre of Forex trading in Europe, but also the world. The London session overlaps with the two other peak Forex trading sessions (Tokyo and New York), meaning that a large proportion of daily Forex transactions take place during this period of time.

This increased Forex activity results in high liquidity throughout the session and, potentially, lower spreads. A further effect of this increased activity is that the London session tends to present the most volatile Forex market hours. Volatility tends to dip in the middle of the session, before picking up again once New York opens.

The New York Trading Session

When the North American session comes online, the Asian markets have already been closed for several hours, but the day is only halfway through for European Forex traders. The session is mostly influenced by activity in the US, with contributions from Canada, Mexico and a few countries in South America.

The morning hours mark high periods of liquidity and volatility, which both tend to die down in the afternoon once the Europeans cease trading.

Forex Session Overlaps

As you are likely to have noticed from the Forex market hours of the different trading sessions, there are periods of the day where two sessions are open at the same time.

These overlaps represent the busiest times of day in terms of Forex transactions, simply because there are more market participants active. Traders can expect both higher volatility and liquidity during these Forex trading times.

Currency pairs display varying levels of activity throughout the trading day, based on who is active in the market at any given time. Being aware of the different Forex sessions gives us an idea of what time of day Forex pairs are most active.

For example, during the London and New York session overlap - which represents the busiest time of day trading wise - you can expect the EURUSD and GBPUSD to be at their most active, with high volatility and liquidity. On the other hand, volatility and liquidity would be considerably lower in both of these pairs during the Sydney session.

This is highlighted in the EURUSD chart below, where, from left to right, the sections highlighted represent the overlap between the London and New York sessions and the Sydney session, respectively.

The Standard Deviation indicator along the bottom of the screen reflects the level of volatility in the market - which is noticeably higher during the London and New York Forex session overlap.

Therefore, if you are a Forex trader who thrives off volatility, understanding the different trading sessions can help you decide which time of day is best for trading which currency pairs.

Similarly, if your trading style dictates that you avoid periods of high volatility, you can analyse which times of day you should probably stay away from the markets.

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About Admirals

Admirals is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.