The foreign exchange market is open hours a day, and forex (FX) is the largest financial market in the world. Unlike the London stock market, forex has no allotted hours for trading. The foreign exchange market is made up of different international markets, each of which has its own trading session.
One of the major markets behind the popularity of the FX market is its flexibility. Because it is open 24 hours a day, 5 days a week, people can always keep track of the market from different parts of the world. This means it is possible to closely monitor the FX activity, making the market suitable for investors with a range of trading styles and strategies.
The four major forex hubs are New York, London, Sydney, and Tokyo. These FX hubs have different trading session times, normally listed in Coordinated Universal Time (UTC) for easier standardization:
London: 8 am to 5 pm UTC
New York: 1 pm to 10 pm UTC
Tokyo: 12 am to 9 am UTC
Sydney: 10 pm to 7 am UTC
These trading sessions overlap, which is why that market is available 24 hours a day. The overlapping hours are understandably some of FX’s busiest, as the number of traders is massively increased. This means that the market is generally at its most volatile during overlapping hours, making them some of the best times to trade forex in the U.K.
Let’s have a look at the trading hours which overlap between FX hubs. London- New York (the European-American session) 12 pm to 4 pm UTC, and in the case of Tokyo-London (the Asian-European session), overlapping hours are: 7 am to 8 am UTC. Also, Tokyo-Sydney (the Asian-Pacific session) 11 pm to 6 am UTC.
Forex trading hubs and useful information
Within the time periods mentioned above, other markets will also be trading. The forex market does not begin and end with the four major hubs. Notably, there are more than 20 different countries within this decentralized global network. Nevertheless, London, New York, Tokyo, and Sydney are the four most active markets.
According to the Bank of International Settlements, more than 40% of the FX daily trading volume comes from the U.K.. The USA is the second most active trading center. Thus, the overlap between London and New York is the busiest time for the FX market.
It is desirable to remember that these times can change throughout the year. Countries such as the U.K. and others put the clocks forward or back for Daylight Saving Time.
Typically, the forex market is closed over the weekend. The market opens on Sunday at 9 pm GMT and closes on Friday at 10 pm GMT. If people would like to trade on Saturdays, they will need to find a specialist broker. At the moment, IG Markets Ltd is the only provider in the U.K. that offers trading on the GBP/USD currency pair over the weekend. The company’s weekend trading hours open on Saturday at 4 am GMT and close on Sunday at 8:40 GMT.
Most common currency pairs
The forex market revolves around traders who convert one currency into another. So, every transaction concerns a currency pair. Within each currency pair, one currency is known as the base currency and the other as the quote currency. The most commonly traded currency pairs are EUR/USD, USD/JPY, as well as GBP/USD. The base currency is the first currency in each pair and the quote currency is the second.
Each currency pair represents how much of the quote currency people would need to have the same value as 1 unit of the base currency. The difference between the base currency price and the quote currency is referred to as the spread.
It’s time to explore the best trading times for major currency pairs. For instance, in the case of USD/JPY, the best time to trade would be during the Tokyo and New York trading sessions. This would give traders two windows of time in which to trade: between 12 am to 9 am UTC (Tokyo session) and then between 1 pm and 10 pm UTC (New York session).
One of the major reasons why EUR/USD and GBP/USD are so popular is one interesting fact. They are so popular because the European and American trading sessions overlap. Consequently, there is a lot of interest from banks, traders, and investors in both countries simultaneously.
Best Trading hours in the U.K.
Because the European trading session has almost the same opening times as the London session, EUR/GBP is a very popular currency pair during these hours. According to the data, EUR/USD had an average daily price movement of 46 crosses 12 months from November 2018. Interestingly, during the same period, the EUR/GBP currency pair had a pip movement of 50 and GBP/USD had a pip movement of 79.
The New York session is the final session to close its doors before the Sydney session opens the next day. Thus, it often benefits from last-minute interest from investors, particularly at the end of each working week.
If you’ve chosen to trade currency pairs that include USD, the New York sessions can definitely be the most optimal time to trade forex in the U.K. Interestingly, this is because many USD crosses have their highest trading volumes during this time.
The London, as well as Tokyo sessions, cross over by 1 hour every day. This hour represents the best time to trade forex pairs which include JPY, such as USD/JPY, EUR/JPY. The Japanese yen is not particularly volatile and is often regarded as a safe haven for traders. On the other hand, the Australian dollar can be quite volatile because it is a commodity currency. The combination of the liquid yen as well as the volatile Australian dollar makes this pair a popular choice during the crossover between the Tokyo and Sydney trading sessions.