Proper timing is a crucial aspect of successful short-term trading. Engaging the marketplace during periods of maximum participation increases the efficiency of trade execution as well as the probability of recognising opportunity.
Equities, futures and currencies all have unique trading sessions, marked by periods of extreme activity and lagging participation. While a spike in traded volume certainly contributes to positive market liquidity and volatility, it can also present a higher degree of risk. Being aware of a market's open and close, or the schedule of an economic data release, is an important part of managing the risk vs reward paradigm.
Forex Market Hours: Open And Close
The forex is a digital marketplace that features millions of participants from around the globe. Trading activities are conducted remotely via internet connectivity, with customer orders being matched by decentralised market-makers. The robust order flow drives US$6.6 trillion in average daily turnover, making the forex the world's largest marketplace.
The sun never sets on the forex trading day. It's up and running on a 24/5 basis, opening at 10:00 PM UTC Sunday and closing at 9:00 PM UTC on Friday. Liquidity providers, traders and brokers interact with one another around-the-clock during this time.
Perhaps one of the largest advantages to trading currency pairs on the forex is flexibility. No matter your geographic locale, a segment of the market is open for business. Below are the standard session hours for the four premier forex hubs in the world (times are relative to Universal Time Coordinated (UTC):
- Sydney, Australia: 10 PM to 7 AM UTC
- Tokyo, Japan: 12 AM to 9 AM UTC
- London, England: 8 AM to 5 PM UTC
- New York, U.S.: 1 PM to 10 PM UTC
Due to the fact that the forex is made up of many international markets, there are times during each day when various sessions "overlap." Overlap takes place when two global trading days coincide, thus increasing the number of market participants. As a result, liquidity and pricing fluctuations more readily increase.
Listed below are the daily overlapping times in the forex (UTC):
- European-American: 12 PM to 4 PM
- Asian-European: 7 AM to 8 AM
- Australian-Asian: 11 PM to 6 AM
Among these periods, the overlap between the European and American sessions consistently generates the most volume and volatility. This is largely due to the hours between 12 PM and 4 PM UTC constituting the London afternoon and New York morning. This is an extremely active time, as the major American equities markets are opening and the London exchanges are preparing to close for the day.
In addition, the European-American overlap regularly includes key economic statistics and market-driving events. Announcements addressing inflation, economic growth and central banking activities are frequently scheduled on or around the overlap period. Statistics such as CPI and GDP, as well as and policy releases from the U.S. Federal Reserve (FED) and Bank of England (BoE) often drive volatility during the 12PM to 4 PM UTC time frame.
Equities: Open And Close
Global equities markets typically experience an increase of traded volumes near the opening and closing bells. Listed below are the times of market open and close (per the market's local time zone) for some of the world's most prominent equities markets:
- New York Stock Exchange (NYSE): Opens 9:30 AM, closes 4 PM
- Japanese Exchange Group (JPX): Opens 9 AM, closes 3 PM
- London Stock Exchange (LSE): Opens 8 AM, closes 4:30 PM
- Australian Securities Exchange (ASX): Opens 10 AM, closes 4 PM
- Frankfurt Stock Exchange: Opens 9 AM, closes 8 PM
- National Stock Exchange Of India (NSE): Opens 9 AM, closes 3:30 PM
Market open is an important time of day for traders and investors alike. The minutes preceding and following a market's open can be extremely active reflecting overnight news items, institutional investment practices and retail trading activities. Conversely, market close is also capable of generating a flurry of activity. As day traders exit the market and longer-term investors look to take positions for the coming session or sessions, enhanced pricing volatility may ensue.
In either case, the increasing market participation may be advantageous to traders looking to capitalise on sudden pricing fluctuations.
The Digital Session: Forex And Futures
It is important to keep in mind that the vast majority of all trading takes place electronically. Market access provided via internet connectivity gives individuals the ability to trade global markets on a 24/5 basis. While staying abreast of favourable times in which to trade equities is relatively straightforward, periods of heightened market participation vary in the futures and forex markets.
In futures, the Asian-Pacific, European and American sessions are the three major international trading days that substantially influence volume. Within each of these sessions, there are premium trading times in which heightened levels of liquidity and volatility afford traders enhanced opportunity.
Listed below are a few daily time slots that consistently stimulate trading volume, producing favourable conditions for active futures traders:
- German Open: 6 AM
- London Open: 7 AM
- New York Open: 1:30 PM
- European Close: 4 PM
- American Electronic Close: 9:15 PM
Aside from the CME's daily electronic close at 9:15 PM, each of the above times serves as a guideline. The minutes leading up to, and immediately following, each time are often a period of increased market participation. Each global futures market (and product) is unique; it is crucial that a trader identifies the tendencies of a chosen marketplace before the commencement of trading.
In a similar fashion, the forex includes many international markets, thus creating a 24-hour trading day. However, instead of optimal periods being exclusive to a traditional open or close, the premium times to trade forex often occur during key "overlapping" periods.
Identifying the optimal time in which to enter or exit a given market is a trader-specific exercise. While periods of enhanced liquidity and volatility may be desirable for some traders, others may see an abundance of risk. An individual's capital resources, risk tolerance and style are considerations that must be taken into account when deciding on the best time of day to trade.
This page was updated on 7th February 2020.
Russell Shor (MSTA, CFTe, MFTA) is a Senior Market Specialist at FXCM. He joined the firm in October 2017 and has an Honours Degree in Economics from the University of South Africa and holds the coveted Certified Financial Technician and Master of Financial Technical Analysis qualifications from the International Federation…