Pivot Point Trading, something for you? Forex Brokers Explained
Apr 09

One of the perceived advantages of Forex trading that the markets are opened 24×5.  Actually a bit longer than that as the spot markets open at Sunday evening New Zealand time, and close on Friday evening Central European Time.  Translated into US time zones:  there is no Forex trading during the weekend, from Friday 01:00PM EST to Sunday 05:00PM EST.  Outside this weekend time window, you can place trades at the Forex spot market.

Is this really an advantage in your daily trading?  It depends on your perspective.  Even if the markets are open 24×5, this doesn’t mean that one of the other touted advantages, i.e. market liquidity, is constant over the entire period the markets are opened.

If high liquidity is what you’re after, you have to limit yourself to trading the major currency pairs only.  And if you do limit yourself to these, you have to know that for each of these pairs, there is a ’session-like’ period within the day, during which liquidity is highest.  What time period that is depends on the currency pair and on the normal business hours for the countries/continents that are involved in that currency pair.

The following table shows the session open and session close of a couple of major cities:

Forex trading sessions around the globe

The ‘X’es show where trading sessions overlap.  Looking at this table, the following facts should sink in:

  • From midnight (GMT) to 07:00AM (GMT) multiple sessions are open in the Asia/Australasia-region.
  • From 12:00AM (GMT) up to 08:00PM (GMT) the European and US-trading sessions are active in parallel.

It is during these overlapping trading sessions, that maximum liquidity exists for the currencies of the countries/continents involved.

Are you an EUR/USD trader?  For maximum liquidity, you should limit your trading to the early afternoon till early evening (GMT).  Are you into JPY trades?  In that case you’d better limit your trading to the overlapping sessions after midnight (GMT).

Clear as mud?  ;)

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