The foreign exchange markets also known as Forex, are generally regarded as being accessible to traders around the clock. At any time of night or day, the trader of currencies is able to access the markets, opening and closing positions on a huge range of global currencies on their account. This is one of the big attractions of this method of trading and the reason why so many people from all around the globe are attracted to this particular method of investment.
The Forex market is the most active of all financial markets. Each day several trillion dollars exchange hands via an online network of computerised exchanges and banks. It is these that make up the Forex market as opposed to the physical exchanges on which Stocks and shares are dealt. The Forex market also compares favourably with the regionalised stock markets which restrict traders to making their deals within set times.
The opening times of the world’s regional stock exchanges do however influence the movements on Forex. The financial trading day tends to be the most ‘active’ time for currencies to be traded. Financial news and data is released during this time which affects not only the direction of markets but also the desirability of holding currency. The opening time of these markets in particular, sees heavy volumes of currency changing hands, as trades reposition their holdings to reflect their latest view on value.
The twenty four hour trading day on Forex is divided into four distinct sessions. These coincide with the opening of the four major financial trading regions around the globe. These are commonly known as the London (or European) session, the US session, the Pacific session and the Asian session. Each session is defined by the opening of the key local stock exchanges. For example the New York Stock Exchange open and close defines the hours of the US currency session.
For the trader of Forex it is important to be aware of these sessions. New traders can often get caught out by holding positions open on their account when a new session comes on line. The start of each session tends to exhibit high volatility. This makes it particularly suitable for traders of breakouts who will often harness this opportunity to capture strong breakout moves from prior identified ranges.
It is important to understand the characteristics of each trading session. By looking more closely at the entire trading day it is possible to identify the currencies that are most likely to move at what point in the day and also to avoid overlaps when trading activity can become particularly volatile. An example of this is the opening of the US session half way through the London trading session. In experienced traders can easily get caught out by not protecting their positions at this time of day.