We analyze in detail at what time it is better to trade on Forex and what trading strategies to use depending on the time of sessions.
Today I decided to analyze in sufficient detail such important issues as:
- What is forex trading time?
- When does the forex trade start?
- What time does forex work?
- How does your profit depend on the time of day?
- What is temporary volatility?
- What is an intersessional flat?
- What trading sessions are there and what time do they open?
I will answer these and many other questions in this article.
I think everyone who has ever wondered about trading in the financial markets has come across a question such as the time of the exchange or the schedule of trading sessions on Forex. During standard training courses, which can be found at almost every step on the Internet or in the offices of brokerage companies, very little attention is paid to this important issue. But it is precisely on such a parameter as the trading time that the ability to earn money on the exchange directly depends. If the trading session is closed, the market does not work, and therefore there is no opportunity to open deals and earn money. Let’s find out what time the beginning of trading sessions on the forex market occurs.
What is the difference between the Forex and the stock market
The main question that every seeker of the opportunity to earn on the stock exchange is asked is when and how is the access to trade possible.
Stock Market Hours
The stock market, so to speak, has its own country, or rather it will be said that in every part of the world, there is the largest stock exchange, and each of them has its own working time. Below I gave a list of the largest stock exchanges in different parts of the world, and indicated the time of work according to the generally accepted world time UTC / GMT 0:
Thus, it turns out that the work on the stock exchange is carried out in the daytime, and at night the exchange does not work. And if you are, for example, in the region of the Asian session, there is simply no way to carry out transactions with financial instruments during the daytime on the NYSE American Exchange. We will have to be content with the capabilities of the local TSE exchange. Of course, the whole world is used to working this way and it does not create inconvenience, but there are situations in which round-the-clock access to trading is absolutely necessary. The situation of 2008 immediately pops up in my memory, when most investors on the American exchanges were in assets and only after the close of trading did they learn about the beginning of the famous collapse. Of course, they could not do anything and simply could not get rid of assets. It only remained to wait for the morning opening of trading. When the auction opened, the quotation immediately began with huge price gaps of 30 percent or more. If the exchange did not close at night, investors would have the opportunity to get rid of assets with less loss.
The price gap between the closing price of the previous period and the opening price of a new one arises not only in times of serious upheaval. On the stock exchange, the price gap associated with a break in trading is generally quite common and happens before almost every opening of trading.
In the figure above, I gave an example of such a price gap on the APPLE stock chart. The difference between closing and opening prices was more than 20 points, and this is a rather large gap for the asset. Due to this specificity of work, traders who use short-term speculative strategies very often encounter similar surprises, which are sometimes very expensive.
Forex trading hours
The main difference between the forex market and the stock exchange is decentralization. This means that in order to gain access to trading operations, it is not necessary to become attached to a specific place and time. Unlike the stock exchange, forex works around the clock. Why? Because its work is provided by banks, banks around the world and in all time zones. The round-the-clock operation of the foreign exchange market is provided by 4 successive trading sessions:
- Pacific trading session (21:00 – 05:00 UTC / GMT 0).
The work of the Pacific trading session is provided by the work of the two largest exchanges in this time zone: NZX WELLINGTON, and ASX SYDNEY. The beginning of the Pacific trading session Moscow time is 24:00 and closing at 08:00.
- Asian trading session (24:00 – 09:00 UTC / GMT 0).
The work of the Asian trading session is supported by the work of the three largest exchanges in this time zone: HKE HONG KONG, SSE SHANGHAI, and TSE TOKYO. The beginning of the Asian trading session Moscow time is 03:00 and closing at 11:00.
- European trading session (07:00 – 16:30 UTC / GMT 0).
The work of the European trading session is ensured by the work of the four largest exchanges in this time zone: LSE LONDON, SIX ZURICH, FWB FRANKFURT, and JSE JOHANNESBURG. Of course, MOEX MOSCOW (Russian Moscow Exchange) is also located in this region, but it is not the largest. The beginning of the European trading session Moscow time is 10:00, and the closing at 19:30.
- American trading session (14:30 – 21:00 UTC / GMT 0).
The work of the American trading session is supported by the work of the three largest exchanges in this time zone (and not only): CHX CHICAGO, NYSE NEW YORK, and TSX TORONTO. During the American session, the largest exchange in the world – the NYSE (New York Stock Exchange). The start of the American trading session Moscow time – 17:30, and closing at 24:00.
It is worth considering one very important point. Opening and closing times of trading sessions are taken into account according to the current “wintertime”. In the case of daylight saving time, the sessions will shift by one hour.
For convenience, I presented the session time in the form of a picture below in UTC time. A schedule of forex sessions in Moscow time is presented above.
Trading sessions are arranged so that one replaces the other, and even overlap each other. This ensures the round-the-clock operation of the forex market. Such a parameter as volatility depends on the operation of a particular trading session. Volatility is the number of price fluctuations per unit of time. During the operation of each trading session, the volatility parameters are different. Those parts of the world where the largest number of bidders live and the largest exchanges are located, show the highest volatility parameters. Also, the volatility of a particular instrument depends on the interest in this instrument in the region. For example, trading in the currency AUD (Australian dollar) is most actively held during the work of the Pacific trading session. Countries where trade occurs at this time, such as New Zealand.
However, the fact that forex works around the clock does not mean that it never closes. Closes. This happens on the weekend. On standard European weekends – Saturday and Sunday. These days the market is closed and trading is impossible. On Friday at 23:59, the market closes, and at 00:01, Forex trading begins on Monday. Opening Forex Moscow time occurs at 00:01. Often, the opening of trading is accompanied by price gaps (gaps) similar to the gaps in the stock exchange.
The figure below shows how the volatility on the chart of the EURUSD currency pair changes.
We see that in the morning hours, only the Asian trading session is open, while the European and American are closed. And, of course, that interest in operations with currencies represented in the pair is not high, which is reflected in price fluctuations, which are practically absent (gray zone). And another situation is when the European session begins. The price immediately begins to fluctuate much more actively and the volatility parameter increases by 2 or more times. So, if your trading strategy involves working with a low volatility parameter, working with this currency pair is better at a time when the European and American sessions are closed.
Work Strategy “Intersessional Flat”
Above, we examined the principle of the exchange’s work on time and the time of forex sessions. Also, we talked a bit about how to use this knowledge. Now let’s talk about how this knowledge can bring us profit. I want to tell you about one very old trading strategy, which is based on the principle of trading sessions. This trading strategy works mainly on one currency pair – EURUSD.
The essence of the strategy is that during the work of the American and European trading sessions, there is a short period of time, about an hour, when there is reduced volatility. This happens often, but not daily. I am talking about the gap between the end of the European session and the start of the American. When about an hour remains before the end of European trading, the trading intensity decreases sharply and a narrow side channel (flat) is formed. This channel ends with the opening of trading in America, and the price breaks one of the borders of the channel and goes in this direction to the stage of high volatility. At the time of the breakthrough of this channel, I propose to work. All you need to do is find this flat and place orders using pending orders.
Now in more detail:
- An hour before the close of the European session, we look at the pair’s schedule for the presence of an intersessional flat;
- If there is no flat, we abandon this idea until the next day. If a flat is detected, it is necessary to determine its boundaries;
- At the resistance level, we set up a pending buy order, and at the support level we set up a pending sell order;
- We are waiting for the opening of the American trading session, and we monitor how one of the orders will work;
- For example, a buy order (Buy zone) has triggered. Set the profit lock at a distance less than or equal to the width of the intersessional flat (Profit zone);
- We set the loss limiter at the level of support for the intersessional flat (Stop zone);
- When one of the triggers of the orders, the second failed one must be removed in order to avoid unnecessary risks;
- We are waiting for the fixing order to trigger. The probability of a positive event in this strategy is approximately 70%.
The trading time for a particular currency or instrument is usually indicated by the broker through which you trade on the exchange. This is stated in the specification of the trade contract. For example, the time of trading in the ruble at Forex coincides with the opening hours of MOEX of the Moscow Exchange. The trading time for shares of a company coincides with the time of the stock exchange on which shares of this company are placed.
For the convenience of tracking exchange time, there is a very convenient site.
This site presents unique exchange watches that show the working hours of all the major world exchanges.
What is the best time to trade forex?
In conclusion, I want to say that it is very important to take into account the time of quoting instruments and the parameter of volatility in a trading strategy. The European region in this regard is in the most favorable position, it covers the work of the two most active trading sessions, and, in fact, has the opportunity to observe high volatility from morning to evening. However, high volatility is not always an ally for the trader. The higher the volatility, the higher the “market noise” parameter, which I talked about in one of my articles. Therefore, the trader needs to avoid short stop orders during this period.
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