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July 31, 2020

Forex market volume and trend by time - Global FX market hours

Did you know that Forex market has different trend and volume depending on the time of the day?

Forex-market-volume-and-trend-by-time---Global-FX-market-hours Forex-market-volume-and-trend-by-time---Global-FX-market-hours

Why you should know the trend of FX market by time?

Since FX is traded in the foreign exchange markets around the world, you can trade 24 hours on weekdays.

See also – What is Forex?

Among them, London, New York, and Tokyo (including Hong Kong and Singapore), which have the largest trading volume in the world, are called the three largest markets in the world, and currencies are actively traded during the time each is open.

Trades are easy to close during times when the market is active, and difficult to close during times when there are few market participants.

Therefore, it is a good idea to estimate the timing of trades based on the world’s three largest markets.

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Open times of Forex markets around the world

The foreign exchange market does not exist as a concrete place like the Tokyo Stock Exchange for stock trading.

The FX market is a group of foreign exchange transactions conducted by financial institutions and individual investors around the world via the Internet, and the market price changes depending on each transaction in real time.

Therefore, in FX, it is possible to trade through 24 hours on weekdays, by going through the time periods when the market opens around the world.

Forex Market Center Time Zone Market Opens (GMT) Market Closes (GMT) Market Status
Frankfurt Germany Europe/Berlin 2015/3/18 7:00 2015/3/18 15:00 Open
London – UK Europe/London 2015/3/18 8:00 2015/3/18 16:00 Open
New York – USA America/New York 2015/3/18 12:00 2015/3/18 20:00 Open
Sydney – Australia Australia/Sydney 2015/3/18 18:00 2015/3/19 5:00 Closed
Tokyo – Japan Asia/Tokyo 2015/3/18 23:00 2015/3/19 7:00 Closed

Note that when summer time is applied, the open/close time is one hour earlier than standard time (winter time).

Wellington and Sydney are in the Southern Hemisphere, so the season is the opposite of the Northern Hemisphere.

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The basics of FX market trend

1. Exchange rate fluctuates even on Saturdays and Sundays

In FX, it is closed from Saturday morning to Monday morning, but the exchange rate fluctuates outside the trading hours too.

This can lead to what is commonly called a “window” with a space between the Friday close and the Monday open.

There are two reasons why the rate fluctuates even on Saturdays and Sundays which are movements in the Middle East market and bilateral trading.

Friday and Saturday are closed in the Islamic region, and the market is open on Sundays.

In other regions as well, direct transactions (fair transactions) with financial institutions may be conducted by persons who require large-scale exchange.

If you are unfamiliar with trading, it is better to close your position on Friday and not carry forward your position until Monday, because if the trade is concentrated, a large “window” may open.

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2. Characteristics of world’s 3 largest markets

Among the markets in each region, the 3 largest markets in the world, Tokyo, London and New York, have high trading volume, and during the opening hours, trading is actively conducted centering on the currency issued in each region.

The US USDJPY is a good place to start, so it’s recommended to aim when the USD is actively traded and trends tend to occur.

Of course, the USDJPY will be traded during the Tokyo time, but there is a tendency for the price movements to be relatively quiet as a market for foreign exchange gains.

Let’s look into the 3 main market hours in Forex.

Tokyo time
Calm movement that inherits the trend of the previous day.
London time
Active movements related to speculative trading and gold trading
New York time
Trends tend to form easily

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1. Characteristics of Tokyo market

The Tokyo market is a huge market with a trading volume share of about 6% of the total foreign exchange market.

Based on reviews by the Bank for International Settlements (BIS) 2019 and central banks of each country.

Tokyo market’s trading volume includes from Tokyo (4.5%), Singapore (7.6%) and Hong Kong (7.6%).

In the Tokyo market, trading of Japanese yen, which is the currency of Japan is evaluated as “safe assets”, becomes active.

Since the price tends to move in tandem with the Nikkei 225 and TOPIX, it is important to understand the information in Japan when domestic stocks are traded.

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Chart movements change after “public announcement of mid-market price”

At 10 o’clock on the Tokyo market, the “mid price” will be announced based on the exchange rate of 9:55 on the same day.

The mid-price is the standard rate when a financial institution receives an order from customers on that day and sells (exchanges) foreign currency.

Therefore, before and after the mid-market price announcement, the participation of actual demand sources (people who need currency exchange for international transactions) will increase, and the price movement in the Tokyo market will become active.

In particular, 5th, 10th, 15th, 20th, 25th and the last day of every month, tends to be concentrated on companies’ settlement days, so demand for buying USD tends to increase and the JPY tends to depreciate.

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Weakness of stock prices or high stock prices

Exchange rates and stock prices are linked, but in the Tokyo market, unique movements such as “high stock prices and weak JPY” can be seen often.

This is due to the presence of foreign investors, who own about 60% of the TSE market capitalization, and the large number of export companies unique to Japan.

For export companies that sell goods overseas and have foreign currencies, a weak JPY will lead to higher sales and better performance, leading to higher stock prices.

On the other hand, when the stocks are weak, foreign investors tend to sell Japanese stocks and convert them into JPY, which makes JPY stronger.

It is a good idea to consider these Japanese market characteristics when conducting Forex trading.

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2. Characteristics of the London market

The London market mainly trades the native currency, the pound, and the EU’s unified currency, the euro, and has the largest trading volume in the world as of 2019.

Due to the geopolitical risk peculiar to Europe and the mechanism of speculators (traders) such as hedge funds, it can be said that the difficulty of predicting price movements is rather high.

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Price fluctuations are strong during London time

The time when the New York market opens is called London time, and traders across Europe participate in the market.

On the day when the economic indicators of the UK and EU economic zones are released, the GBP/EUR prices will be more volatile.

If the announced price is different from the expected value, the market price may change significantly, so be careful if you are trading GBP or EUR.

Although the price movements tend to settle temporarily later, since there are days when British and American economic indicators will be announced during this period.

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Beware of large price movements before and after the London Fix

The “London Fix” is the “market price” in the Tokyo market, and is announced daily.

Before and after the announcement of the London Fix, as with the Tokyo market, many buy and sell orders from actual demand sources were brought in, and transactions such as pounds, euros, and dollars also increased.

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Beware of EU Crisis and Geopolitical Risks

In the London market, which links the European markets together, the economic conditions of two countries, Germany, the EU’s main power, and France, whose domestic situation is deteriorating, will have a major impact.

Since the UK’s decision to leave the EU in 2016, the value of the GBP and EUR against the USD has not recovered much, and it is pointed out that the policy is becoming extreme throughout the region.

In addition, it is susceptible to the situation in the Middle East and Russia, and it is somewhat likely that chart movements will be irregular as the entry of professional investment professionals aiming at the price movements is conspicuous.

When trading in the London market, frequent checks of European news and economic indicators are essential.

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3. Characteristics of the New York market

The New York market mainly trades in the US dollar as a key currency, and tends to have higher price movements throughout the trading hours.

As the important economic indicators of the United States are immediately reflected and the opening time overlaps with the London market, not only actual demand sources but also many speculators participate, and it is also a time zone where major movements such as trends are likely to occur.

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Be aware of important economic indicators

The “US Employment Statistics” released around the time of opening of the New York market is the most important indicator that has a strong impact on the FX market, and the market price may change significantly depending on the degree of deviation between the announced value and the expected value.

Employment statistics are released on the first Friday of every month, and the number of employees in the non-agricultural sector and the unemployment rate are particularly important.

In addition, be careful about important economic indicators such as US policy rates, which are determined by FOMC eight times a year.

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At what time you should trade?

During times when there are many market participants, transactions tend to be successful.

On the contrary, when trading becomes inactive, it becomes difficult to trade at the desired price, and there is a risk that the price will tilt in one direction with a small price movement.

Please note that there are few market participants during the early morning hours when the Oceania market opens, Christmas, New Year holidays etc, and spreads (commissions when transactions are completed) tend to widen.

Also, depending on the trading style, the suitable time zone will differ, so let’s explain it below.

Short-term trading goes well with London and New York markets.

Short-term trading such as scalping and day trading should be done when the market is active.

Trading is booming at the time of opening the world’s three largest markets, so traders aim for that timing.

We especially recommend the time zone when both London and New York markets are open.

There is no need to be tied to a specific time zone in medium-to-long term trading.

When you take a position in the medium to long term, it is better to judge “whether you have a position or not” by “the price of the transaction” rather than “whether the transaction is active or not”.

Swing trades and position trades are characterized by the long time they hold a position.

You don’t have to be tied to a specific time of day, but it is important to identify the long-term direction using fundamental analysis.

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