Global currencies are exchanged around-the-clock on the FX market. The volume of transactions and the number of participants in the forex market have both expanded as a result of the increasing accessibility of cutting-edge technology and information processing.
Key Points in the Main Currency Market
- Since currencies are traded on the forex market continuously, you may often execute an FX deal whenever you choose.
- This is accomplished as trade moves throughout the day from one major market in one time zone to another (e.g., from London to New York to Sydney to Tokyo).
- However, retail traders often may only trade from Monday through Friday.
- Many forex day traders prefer not to keep holdings overnight since markets might change at any time.
Continuous Trading
Trading on foreign currencies continues even though many international markets are closed while North American ones are open. While most currency trading takes place while its primary market is open, there are many other banks across the globe that store foreign currencies, allowing for trading to take place even when the primary market is closed.
For instance, even when the Japanese markets are closed while the North American markets are open, North American traders may still buy and sell Japanese yen via their banks and brokerages. However, while the Japanese market is open, there is more liquidity in the market for the Japanese yen.
While there may be overlaps in market hours across the globe, the principal markets at any given moment are typically:
- New York: 8 a.m. to 5 p.m. (EST)
- Tokyo: 7 p.m. to 4 a.m. (EST)
- Sydney: 3 p.m. to 12 a.m. (EST)
- London: 3 a.m. to 11 a.m. (EST}
Cons of Trading During a Closed Market for a Currency
Some investors advise against trading during a currency’s closed market hours. Numerous trading positions are closing at market closure, which may produce volatility in the currency markets and irregular price movements. When markets open, the same may occur. Possibly due to their desire to avoid holding holdings over the weekend, traders are now initiating positions.
Holding transactions over the weekend is not advised unless you have a long-term trading strategy that involves holding trades for many weeks or months.
Weekend Trading
The EST time for the U.S. foreign exchange market is 5 pm on Friday and 5 pm on Sunday.
1 Despite the fact that the market is only closed to individual investors, central banks and other institutions carry out currency trading over the weekend. Therefore, the price between Friday’s closure and Sunday’s opening is often different. This distinction is referred to as a gap.
If a trader doesn’t want to expose their position to the danger of gapping, they will close it on Friday night or set stops and limits to control the risk.
A bank might fail within a weekend in certain nations if there is market unrest. This might imply that by the time the market reopens on Sunday, your position will have significantly changed.
Particular Considerations
For exchange reasons, there is extremely little demand for certain currencies. As a consequence, trading these currencies may be challenging and is sometimes restricted to certain institutions. Since currency trading does not take place on a regulated exchange, there is no guarantee that a buyer or seller will be found who meets your trade’s requirements.
But among the most extensively used are the main foreign currencies, including the US dollar (USD), the euro (EUR), and the Japanese yen (JPY).
