The forex market is the world’s largest financial market. Running almost 24 hours a day in different time zones, many new traders hardly consider the impact of how these time differences can make impact on their investments.
Unlike stock markets that are well connected and follow a standard time, foreign exchange runs on the normal business hours of four different time zones making it a volatile, 24/5 market.
The forex market can be very different than yesterday. Thus, understanding time differences, when different forex markets overlap, and high/low trading sessions is as important as making trade strategies.
If you understand the various risks plus the time-differences, you will be best positioned to make money when the market goes up, and even when it goes down. As many new traders are joining the forex market from African countries including Nigeria and Kenya, this article will be helpful for them.
Let’s get started with how the forex market works in different time zones.
Major Forex trading sessions can be divided into four:
Among them, three trading sessions are traditionally more important: Tokyo (Asian), London (European), and New York (North American). Rather than focusing on trade in all sessions, expert traders often focus on one of these sessions. These three sessions are often referred to as the “forex 3-trading system”, the forex market’s most active sessions.
Apart from the above listed major trading sessions, active traders also take account of the four other Minor trading sessions:
These trading sessions work like a domino effect: one closes, another opens. On the other hand, some forex markets overlap with each other or work simultaneously. For instance, London and Frankfurt are located in the same time zone, there is just a one-hour difference between their opening and closing times.
It would be much easier if we group different forex markets based on the continent. Note that, although Australia is technically considered a part of the Oceania continent, it is not so in the forex market. Both Sydney and Wellington sessions can be considered part of the Asian trading session.
Note: Hours in EST (Eastern Standard Time)
Although the first sunrise is observed in New Zealand, the major trading activities begin in Tokyo (Japan). It begins at 7 PM and ends at 4 AM. With the opening, the Tokyo session takes the bulk of the Asian forex trading. The majority of forex transactions happen in USD/JPY currency pair. GBP/CHF and GBP/JPY also see a fair amount of trading. Japan is the third-largest forex trading spot in the world, accounting for nearly 20% of all the forex transactions during Asian trading sessions.
However, it’s not just the Tokyo, Singapore and Hong Kong are also important forex centers in the Asian market. Interestingly, these two centers are seeing more trading volume presently than Tokyo. While the Japanese forex market accounted for 4.5%, Singapore and Hong Kong together accounted for 7.6% of the total volume.
Sydney forex trading session is from 5PM to 2AM.
European forex market activities begin just when the Asian trading session is about to close for the day. Although the European session coincides with many forex markets (Frankfurt, Amsterdam, etc.), it is London that dictates the forex market. It opens at 3AM and closes at 11AM.
London is often considered the financial capital of the world. Due to its location, the London trading session overlaps with Asian and North American sessions. And during these overlapping sessions, the market becomes more volatile and many currency pairs observe major movements. It is no wonder that 43% of all the forex transactions take place during the London session.
Just when European traders are returning to their desks after lunch breaks, the New York session begins at 8AM. In terms of volume, it is second only to London. It accounts for nearly 17-18% of all forex transactions. Besides New York, Toronto and Chicago are also important trading centers. That’s why some traders refer New York session as the North American trading session. And because US dollars remain the most traded currency (often dubbed as ‘global trading currency’), much of the movements are observed in currencies pegged against dollars.
|Trading Session||EST||GMT+1||Major traded currencies|
|Sydney||Open: 3PM Close: 12AM||Open:10PM Close: 7AM||AUD/CAD, AUD/CHF, AUD/JPY, AUD/NZD, GBP/JPY, NZD/JPY|
|Tokyo||Open: 7PM Close: 4AM||Open: 1AM Close: 10AM||JPY/USD, AUD/JPY, EUR/JPY, NZD/USD, NZD/JPY|
|London||Open: 3AM Close: 11AM||Open: 8AM Close: 4PM||GBP/USD, EUR/CHF, USD/CHF, GBP/JPY|
|New York||Open: 8AM Close: 5PM||Open: 1PM Close: 10PM||EUR/USD, USD/JPY, GBP/USD, EUR/JPY, GBP/JPY, USD/CHF|
As Kenya is located in East Africa, it observes Eastern African Times. Let’s now first see how Kenyan time fits in global forex trading times.
|Trading Session||EST||EAT Nairobi|
|Sydney||Open: 3PM Close: 12AM||Open:11PM Close: 8AM|
|Tokyo||Open: 7PM Close: 4AM||Open: 3AM Close: 12AM|
|London||Open: 3AM Close: 11AM||Open: 11AM Close: 7PM|
|New York||Open: 8AM Close: 5PM||Open: 3PM Close: 12PM|
For Kenyan traders, the best time to trade is from 11AM to 5 PM, as during this times the London and New York sessions are active & overlap with each other. You will see the highest volatility during these trading hours.
Although you can trade during any session, burning the oil at night may not be possible for a majority of traders. From the above table, you can see that except Tokyo the other three sessions are conveniently spread throughout the day. So it can be worthwhile to trade during those overlapping sessions.
The best time for trading in Kenya according to 4 Major Sessions:
If you could wake up during the overlapping sessions between Tokyo and London or London and New York, you can take advantage of the most liquid and volatile sessions.