Forex market is a totally different beast as compared to the stock market. Stock market is open only for a fixed times usually from morning to the evening. After that it closes and trading stops. But forex markets never close. They are open 24 hours a day, 5 days a week except on weekends.
Continuous 24 hour action at the forex markets baffles many new traders. Forex markets have no central exchange. It is an Over the Counter (OTC) market that is spread over various locations in the world.
For a new forex trader, it becomes very difficult to understand when to trade and when not to trade as there is no formal open and close of the market. Many exhaust themselves by sitting in front of their computers all day. Fatigue them and make wrong decisions. An easy way is to divide the day between three 8 hour sessions.
Again divide each 8 hour session in 4 hours by using 4 hour charts. As you will read this article, I will explain how this division is logical and can help you understand the forex markets. Forex markets are basically controlled by three money centers and these three sessions will help you identify the risk appetite and the price action for each.
The three money centers are: Asia, London and New York. Each session is going to coincide with these three money centers. We will call each session as the Asian, the London and the New York Session.
Asian Market Session: Sydney, Tokyo, Hong Kong and Singapore are the main cities that participate in this session. Major players are the export corporations and the central banks. Sydney opens and with that the forex markets become alive each day. Most of the price action that takes place in this session is unsustainable and jumpy.
London Market Session: London is the center of the global forex markets. The price action that takes place during this session forms the trend in the rest of the day trading. London forex markets are deep and highly developed. London market is also assisted by Paris, Geneva and Frankfurt. Since lot of money is needed to move this market, these moves give a lot of information for the traders.
New York Market Session: New York is second to London. Both New York and London overlap in the morning when New York is opening and London is closing. This is the best time of the day for savvy traders to trade as there is a lot of price action during this time.
The following table gives important times of the day that any forex trader needs to know: 00:00 GMT-Sydney Opens. 11:00 GMT-London opens. 15:00 GMT- London becomes very active. 17:00 GMT- London is active and New York opens. 18:00 GMT- London and Europe closes. 19:00 GMT- New York and Chicago getting ready for a close!
The overlap between London and New York is when major price moves take place. London is in fact the trend setter in forex as well as fashion.
If you would like to make a comment, please fill out the form below.
