How to Break Down the 24hr FX Market

One of the questions I get asked most about the FX market is:

“With the market being open for trading 24 hours a day, five days a week, should I be looking to take trades whenever I want to?”

Even I had this question when I first started with Forex!

Most traders start out in the stock market where the market hours are clearly defined and everyone understands that every day, there is a set opening time at 9:30 a.m. eastern time and a set closing at 4:00 p.m. eastern time. Stock traders also know that when that bell rings, all hell can break loose as standing orders from the night before and the premarket come flying in. It’s generally the highest volatility (or speediest movement of price) of the day. That lasts an hour or two maybe and then there is a mid day lull where prices can level off and see if the price movement from the morning can hang on or if it was a classic case of auction theory and prices drift back toward where they started the day. After that, traders usually come back in for the last hour of the day to trim positions or initiate new ones for the coming trading days and this increases volatility once again, though not as much as the open. 

And then the market closes and there’s really nothing more to do until the next day…

Not in FX baby. It’s the market that doesn’t sleep…

The closest thing FX has to an open and close is what’s called “rollover” at 5:00 pm Eastern. Rollover simply means that positions from that day rollover to the next. And this is when interest is either debited or credited from the traders account which is known as the rollover rate. It’s the only thing that separates one day from the next in FX and if you didn’t put the line on the chart, you wouldn’t even know it happened. Any type of period serpater for an fx chart looks like this:


All of the vertical lines are the separation of days at 5:00 p.m. eastern. 

Inside of each day, in between each of the lines on the chart above, is basically three different trading days. I know, mind blown… let me explain.

We call these sessions. The asian session, which is when traders from Tokyo, Sydney and other various trading hubs in the asia pacific region show up to their trading desks and go to work. The second is called the London session. Traders from London, Frankfurt and Switzerland to name a few all participate in the FX market in this session. Finally, the last session of the day is the New York session. Obviously this is when North American traders largely participate in the market. 

Here’s a chart zoomed in on a couple of days that roughly show the session times. They all overlap obviously with open and close times, but like I’ll explain later on, these boxes are showing highest volatility times within those sessions.

Most traders like to have some kind of indicator on their chart that shows session times or at least have a part of their analysis routine that takes into account what markets are open around the world.  

The green box indicates the Asian session, the yellow is the London session, and the blue is the New York session. 

Here’s a chart of market hours for the sessions:

Breaking a forex trading day down like this allows us as traders to apply some of the same concepts from the stock market open and close to a market that feels like it never ends. But instead of one open and close, we can think of it as three general times of increased volatility or increased speed of price movement. As a trader, would you rather trade a slow moving market or a fast one? Most would prefer to trade a market that not only moves fast, but extends and contracts by a high volume of pips. You can see from the boxes above that most of the extension of price happens within at least one of the boxes with price calming down outside of the box. That’s simply because that’s when most of the people who participate in the market… are participating. 

I don’t think I know very many traders that make their living trading the low volatility times outside of the sessions. I want to trade when everyone is trading!

One of the major factors that also supports the idea of sessions is the economic news cycle. News is released very systematically across all sessions. Australian and Japanese news is released early in the Asian session normally. European news is released early in the London session and U.S. news is released like clock work at 8:30 a.m. and 10:00 a.m. with the almost monthly FED announcement at 2 p.m. eastern.

And as most traders know, news moves the market and those traders want to be around when the market is moving. 

To sum it up, yes the forex market is technically open 24 hours a day but it’s divided into three separate, tradeable times based on who around the world is showing up to their desks and what news is coming out that day to get those traders motivated to take risk. 

Leave a Reply

Your email address will not be published. Required fields are marked *