Making the Most of Overlapping Forex Trading Sessions
Reveal the secret of Forex Market Hours by analyzing the four significant trading sessions and how overlapping Forex trading sessions boost trading volume and volatility.
Absorbing the dynamics and technicalities of the Forex market is crucial for aspiring and even seasoned market participants.
You should know the most liquid and highly traded currency pairs to grab the best possible currency trading opportunities. At the same time, understanding when the Forex market is highly active by volume and volatility is also paramount.
This article takes you through the Forex market hours and significant Forex trading sessions. It also discusses why overlapping Forex sessions are vital and how to make the most of them. Stay tuned to uncover some best-to-know untold tales of the Forex market.
Understanding Forex Market Hours
The Forex market trades round the clock, 5 days a week. It begins on Sundays by 5 PM EST and closes on Fridays by 5 PM EST. It remains closed during weekends due to the closure of significant financial hubs and the absence of prominent market players, like central banks, hedge funds, financial institutions, and investment management firms.
Market participants can trade currencies during these hours — commonly known as Forex Market Hours. As the currencies trade across a network of over-the-counter exchanges and computers, anyone from almost anywhere can participate in the Forex market through the Internet.
The global Forex landscape has been divided into four significant sessions: Australian, Asian, European, and North American. Think of the world map from East to West. However, these sessions are named after metro cities that are the financial hubs for those regions.
Let us take a look at the four significant Forex trading sessions:
Four Significant Forex Trading Sessions
As discussed earlier, the Forex trading sessions are named by cities that are financial hubs. Central banks, hedge funds, commercial banks, and other participants buy and sell currencies in these regions.
Sydney Session
Forex trading ideally starts in New Zealand. However, as it falls in that region, the session is named after Sydney in Australia. The Sydney session kicks off the trading week. It sets the ground for more active sessions later.
The session occurs from 7 AM to 4 PM per Sydney local time (9 PM to 6 AM UTC). This session is comparatively quieter. Usually, as the Aussie/ US Dollar (AUD/USD) is one of the highly liquid and highly traded currency pairs, you may not see a higher level of volatility during this session.
Tokyo Session
Tokyo capital markets create a lot of financial activity in this region. Similarly, you can notice considerable activities in Singapore and China, to name a few.
The Tokyo trading session starts at 9 AM and lasts till 6 PM Tokyo local time (12 AM to 9 AM UTC). This session gains momentum as the Asian markets awaken. You can notice less liquidity during this session compared to the London and New York trading sessions.
London Session
The European session keeps the Forex market near the closure of the Asian Forex markets. As the time zone is dense, it involves various financial markets.
The London session occurs from 7 AM to 4 PM UTC. This session is at the center of the trading hours considering the world. You can see the highest volatility and trading volume during the London session.
Also Read: What is the London 4 pm Fix?
The London session overlaps with the other two significant trading sessions: Tokyo and New York. We will discuss the overlapping sessions and their significance in the next segment of this article.
New York Session
As the North American session begins, the Asian markets would have closed hours before. Yet, for the European participants, the day is just halfway through.
The New York session starts at 8 AM and lasts till 6 PM New York local time (12 PM to 9 PM UTC). The financial activities in the US dominate this session. However, there are contributions from Canada, Mexico, and South American countries.
What are the Overlapping Trading Sessions?
The Forex market operates through the four financial hubs mentioned above. As these are spread across various corners of the world, the trading sessions occur in different time zones. Thus, for a few hours, multiple Forex trading sessions remain active. These sessions are known as overlapping Forex trading sessions.
- Sydney and Tokyo sessions are active from 12 AM to 6 AM UTC.
- Tokyo and London sessions trade from 7 AM to 9 AM UTC.
- Similarly, London and New York sessions coincide from 12 PM to 4 PM UTC.
Forex traders mark these time slots as highly active trading hours. Let us understand the reasons behind the volatility and higher trading volumes during the overlapping sessions.
Why is the Forex Market Volatile During the Overlapping Sessions?
The liquidity, volatility, and trading volume increase during the overlapping sessions. As market participants from a wide-spread territory traded currencies during that period, we can notice a drastic improvement in trading volume and volatility.
The most traded currency pairs are usually liquid, as you will not observe any significant change in their exchange rates. However, those currency pairs may attract higher volume during the overlapping Forex trading sessions.
Along with the Forex market, the overlapping sessions also trigger activity in allied financial markets, like Futures, Options, Exchange Traded Funds, and more. CFDs based on Forex is another investment avenue — however, it is based on tracking currency exchange rates and not buying or selling currencies.
The overlapping between London and New York sessions (12 PM to 4 PM UTC) usually takes the highest trading volume. European and North American central banks, commercial banks, hedge funds, and other market players proactively trade during that session — making the Forex market highly agile and dynamic.
Why Does Quality Forex Data Matter?
Reliable, accurate, and unbiased Forex data (historical and live) strengthens your market analysis. It helps you make informed trading decisions. That’s why working with the most reputed Forex data vendor is paramount to ensure a fruitful trading voyage in the long run.
The Forex API that the data providers offer can be integrated into trading apps, websites, wallets, and other solutions. That way, you improve the user experience, as your customers get the most accurate and unbiased view of the Forex market.
The Bottom Line
The article highlights the importance of understanding Forex market hours, covering the most significant sessions, overlapping sessions, and their significance. Knowing when the Forex market is active, you can draw and execute your trading strategies. Choose a recognized data partner to empower your trading verdicts and digital solutions.
