Forex Trading Hours: Sessions, Overlaps, Time Zones, Strategies & Risk

The forex market, boasting a staggering daily trading volume of over $7.5 trillion in 2022, is the world’s largest financial market. It operates around the clock, spanning five days a week. Therefore, traders can log in at any time on a weekday and trade the forex market. However, not all times are ideal for trading, given that the forex market hours are divided into four main sessions.

 

The four main forex trading sessions are the Tokyo and Sydney sessions for Asia, the London session for Europe, and the New York session for North America. These subdivisions are based on the time difference between the three regions and the hours during which the financial market in each region is open.

 

As a trader, you must understand forex trading hours and sessions to identify the best time to trade forex. This article will explore forex trading hours, forex market sessions, overlaps and time zones, and strategies based on sessions and hours. We will also explore risk management and forex trading in different countries.

What are forex trading hours?

Forex trading hours are the hours during which the forex market is open. As a global, decentralised market, the forex market is usually open 24 hours a day, five days a week. On Sunday night, the Asian session begins the trading week with the Sydney market opening at 21:00 GMT and the Tokyo session opening at 00:00 GMT. Next, we have the European session opening at 07:00 GMT and the New York session opening at noon GMT.

 

Forex Session Times in GMT and Local Time
Session	Local Time	GMT
Sydney	07:00 - 16:00	21:00 – 6:00
Tokyo	09:00 – 18:00	00:00 – 09:00
London	08:00 - 16:00	07:00 – 15:00
New York	08:00 – 17:00	07:00 – 15:00

Weekends and holidays

The forex market is typically closed over the weekends since it is only operational from Sunday night to Friday. Once it closes at 9:00 pm GMT on Friday, it will reopen on Sunday night, with the Sydney session opening at 21:00 GMT.

 

The forex market is rarely closed on holidays since most holidays are specific to certain countries but only some of the world. However, the forex market tends to close for the Christmas and New Year holidays, which are celebrated all over the world. Therefore, most brokers will be closed for trading each year on December 25th, 26th and January 1st.

 

There is always thin trading and liquidity during the holiday week between Christmas and New Year's; hence, most trades tend to avoid trading during this low liquidity week, and many usually take a break from the market to resume after the New Year holiday. Trading during the holiday can be risky due to the much higher volatility witnessed in the market.

 

Trading in a market will be limited during country-specific holidays. For example, the country's financial market is typically closed whenever there is a bank holiday in the United States. Therefore, while the Forex market will remain open, there will likely be low liquidity trading the USD pairs during the North American session since most US traders will not participate.

Understanding forex market sessions

As a trader, you must understand how the different forex trading sessions work, especially paying attention to the overlap sessions. In this section, we shall analyse the three forex market sessions and pinpoint the best times to trade in each session.

Asian session

The Asian forex trading session starts on Sunday night and opens at 21:00 GMT daily. The Sydney and Tokyo sessions are the two primary representations of the session, with Sydney opening first. The Tokyo session opens three hours later at 00:00 GMT and stays open until 09:00 GMT, while the Sydney session closes at 06:00 GMT.

 

The JPY, AUD, and NZD pairs are the most active during the Asian session. Currency pairs with these three currencies as a base or quote currency are usually the most active during this session. The Chinese yuan is also active during this period. These currencies are best traded during the Asian forex session.

 

The Tokyo session is crucial for Asian market participants, who can trade currencies linked to their local economies during the session. However, the Asian session tends to have fewer participants than the London and New York sessions; hence, it has less liquidity and could be more volatile than the other two sessions.

 

Asian session trading during holidays is typically characterised by low liquidity amid thin holiday trading volumes. Such times are usually more volatile than usual. Long holidays, such as the Chinese New Year holiday, also tend to have low liquidity and minimal trading from Asian traders.

 

Important announcements like GDP growth data from China and other nations, like Japan and Australia, impact trading in the Asian session as well. Central bank announcements from the region's countries, which typically affect the country's currency and its pairs, also impact volatility in the Asian session. Investors usually keep track of high-impact announcements since they could trigger significant, volatile movements in the affected currency pairs.

London session

The London session opens at 07:00 GMT and remains open until 16:00 GMT. The GBP and EUR currency crosses are the most active currencies during the London session. However, many other currencies also came into play during this period, the busiest trading session in the forex market.

 

The London market hours are critical since they usually witness the highest trading volume due to the overlap with the Asian and New York sessions. For a long time, London has been regarded as the global centre for forex trading. The EUR/USD is the most heavily traded and liquid currency pair globally.

 

The London session tends to have the highest traded volume of the three forex market sessions. Due to the high liquidity, spreads on the majority of actively traded currency pairs during this time are lower. The session also tends to be less volatile unless there are significant news events that could trigger increased volatility.

 

Peak trading volumes are seen during the hours overlapping with the New York trading session—the 12:00 to 15:00 GMT period—which marks the overlap between the London and New York sessions. These overlap hours are typically characterised by high liquidity and increased volatility due to planned US macro releases.

The London fix

The London fix is when forex market makers, such as banks and leading financial institutions, agree on one price for a currency pair. The market makers then use the agreed-upon price to trade the currency pair with their clients, a fair price for the selected currency pair.

 

The London fix is always scheduled for 3 pm in London, which is usually 11 am in New York. However, the New York times may vary based on the daylight savings time zone. Sometimes, the trading flows close to the London fix may overwhelm the forex market by pushing the prices of the affected currencies much higher. This tends to happen during periods of low liquidity.

 

Fixing moves typically occur towards the end of the month, quarter, or year. The most used method of identifying London fix flows is looking at the clock. Fixing moves tend to begin 20–30 minutes before the actual fix, and they peak right at the hour's climax.

New York session

Based on daylight saving time zones, the New York session opens at 12:00 pm GMT or 1:00 pm GMT. Given that the hours overlap with the London session, the session is usually a beehive of activity, leading to increased trading activity and liquidity during the New York trading sessions. The most active currencies now are most USD pairs due to the large size of the American forex trading industry.

 

Most currency pairs, including Asian currencies, tend to have significant price swings during the early New York session due to the overlap with the London session. Most major pairs where the US dollar is the counter or base currency tend to witness significant moves during this session. The US dollar’s performance affects all the currencies it is quoted against.

 

The session is characterised by high liquidity and may also be quite volatile due to the numerous US macroeconomic data releases and Federal Reserve announcements that have a significant impact on USD pairs. The scheduled macro releases, such as GDP, employment, and inflation data, dramatically impact the US dollar and its currency pairs, triggering peak trading volumes.

Sydney session

Based on daylight saving time zones, the Sydney financial market opens at 20:00 GMT or 21:00 GMT and is one of the four major trading sessions. It is open until 05:00 GMT or 06:00 GMT. The Australian market plays an essential role in the forex market since it is usually the first to open on Sunday night. The Sydney market opens before the Tokyo market by a few hours daily and officially kicks off the trading week.

 

The first few hours of trading in the Sydney market are usually characterised by low liquidity and high volatility since only the Australian and New Zealand markets are now open for trading. However, the liquidity improves once the Tokyo session starts and traders from more Asian countries, such as Singapore, start trading. Generally, the Asian market session tends to have the lowest liquidity of the three major trading sessions.

 

Traders should also consider seasonal trading patterns affecting the Sydney trading session, including the Australian tax season. Many traders tend to close their losing trades towards the end of the Australian financial calendar for tax-loss harvesting reasons. The country's tax season runs from 1 July to 31 October for the fiscal year ending June 30. The traders can then reopen their trades in the new financial year.

Overlaps and time zones

Forex market overlaps are periods when two forex market sessions are open simultaneously. The first overlap is usually recorded when the London session opens at 07:00 GMT, and the Asian session still has one hour to go before it closes. The second overlap occurs when the New York trading sessions begin at noon GMT, and the London market still has three hours before closing at 15:00 GMT. These are the two significant forex market overlaps in the world.

Advantages of forex market session overlap for traders

• Increased liquidity: Overlap periods tend to witness an increase in trading volume as the number of traders actively trading is usually higher. The higher liquidity makes it easier for traders to execute large orders without having a massive effect on the price. The period is also characterised by tighter spreads and much better pricing for traders.
• Higher volatility: The higher trading activity during session overlaps can trigger higher volatility, which presents multiple chances for traders to generate returns from significant price movements. Traders who manage risk and make fast decisions can benefit from these conditions.
• More trading opportunities: High liquidity and volatility could create more trading opportunities. Price movements could be more pronounced and easily predictable based on the increased information flow and the global participation of traders.
• Convenience for different time zones: Session overlaps allow traders in various time zones to trade during their local trading hours. This increases global participation and creates opportunities for traders who may not be able to trade during the regular hours of a single market session.

Disadvantages of forex market session overlaps for traders

• Increased risk: The volatility that provides traders multiple opportunities to profit can also increase the risk of loss. Prices could rush in one direction, and traders could suffer massive losses if they do not apply proper risk management strategies.
• Market noise: Session overlaps tend to have an increased volume of trades, which could lead to what is referred to as "market noise." This noise could make it challenging for traders to pinpoint clear trends or patterns. This could complicate decision-making and negatively affect strategy development.
• Spread fluctuations: Although spreads are usually tighter during session overlaps due to increased liquidity, there could be moments when prices fluctuate, and the spreads suddenly widen, especially during and after significant news events or economic data releases.
• Need for fast decision-making: The fast-paced price movements during overlaps require traders to make quick decisions. This could be challenging, especially for beginner traders, and could lead to mistakes or missed opportunities.

London-New York overlap

The London-New York overlap is crucial in the forex market, creating vast trading opportunities. The three-hour overlap tends to have significant liquidity as the big European banks trade with their counterparts in the United States. Forex trades between the top US banks and even central banks like the Federal Reserve are another factor in the high liquidity.

 

Overlaps are critical in the forex market because they are periods of high liquidity and volume. The high liquidity witnessed in the forex market during the New York and London overlaps tends to create numerous trading opportunities in different currency pairs. The number of market traders is usually the highest during this period.

 

Trading costs during the overlap times tend to be lower due to the higher liquidity, but only sometimes. Spreads will sometimes widen due to high volatility after some scheduled macro releases, such as GDP, inflation, and employment data. Spreads could also widen due to geopolitical events and news.

 

Some famous trading strategies traders implemented during the New York-London overlap include scalping and news trading. Scalping involves making numerous trades where a trader targets just a few pips per trade. This strategy works in highly liquid markets with narrow spreads and high volatility. News trading is another well-liked strategy traders use to trade news events during the overlap session.

Tokyo-London overlap

The Tokyo-London overlap is usually just an hour; hence, it is less pronounced than the New York-London overlap. The volume and liquidity witnessed in this overlap session are typically low compared to the New York-London overlap. Therefore, this overlap provides fewer trading opportunities than its counterpart.

 

Trading costs during the overlap times are lower than during the Tokyo session alone due to the added liquidity from the London session. Still, the overlap is minimal since it is just one hour long and does not present significant trading opportunities.

 

Some famous trading strategies traders apply during the Tokyo-London overlap include range trading due to the lack of liquidity and volatility during the overlap period. The range trading strategy worked well during the Asian session overlap because of the limited price movements witnessed during this period.

Strategies based on sessions and hours

The forex market is open 24 hours, five days a week, allowing traders to trade at convenient times. However, not all forex trading sessions are created equal; some tend to have higher liquidity than others. Below, we shall discuss the best trading strategies for each forex market session.

Optimal times and strategies for trading

These are the trading strategies that a trader can use to trade multiple currency pairs in each of the four forex market sessions. The strategies are tailored to the specifics of each trading session.

Sydney session

The Sydney session is usually the first to open and is regarded as less volatile than other sessions. It usually provides an excellent opportunity for traders to plan and set up their daily trades. During this session, traders might consider more stable, range-bound trading opportunities. Due to the session's lower volatility, traders can utilise strategies like support and resistance levels.

Tokyo session

The Tokyo session usually experiences more action than Sydney because it represents the first major financial centre to open. The session is notable for the large number of Asian market participants. Traders focus on Asian-Pacific currency pairs like USD/JPY, AUD/USD, and NZD/USD. Some strategies that worked during this session included breakout trades from consolidation patterns observed during the much quieter Sydney session.

London session

The London session tends to overlap with the Tokyo and New York sessions; hence, it is one of the most liquid and volatile trading times. This session is crucial for the GBP, EUR, and USD trades. Traders could use momentum-based strategies by scouting for significant moves since the European market often sets the tone for the day. Breakout strategies are also popular during this session due to the increased volatility and volume.

New York session

The initial hours of the New York session overlap with the London session, contributing to its extended volatility and liquidity. The USD pairs are usually highly active during this period. News-based trading could be particularly effective during the New York session due to the significant economic releases from the US Traders could also use trend-following strategies since trends set during the London session could continue or reverse.

Overlapping sessions

The London/New York overlap is the most liquid time of the forex market trading day, where the GBP, EUR, and USD pairs are particularly active. Traders could look for momentum trades and high-volume breakouts. The Tokyo/London overlap is less significant because of the smaller overlap period, but it could offer opportunities in the GBP, EUR, and JPY pairs.

Trading during off-hours

Trading during off-hours entails trading during the three hours that follow the North American session's close at 19:00 GMT and the Tokyo session's opening at 23:00 GMT. It could also mean trading during the Sydney session, which tends to have thin liquidity and low volatility.

Risks of trading during off-hours

Reduced liquidity

Liquidity is the ability of traders to buy or sell an asset without triggering massive price changes. During off-hours, the forex market tends to have a much lower trading volume, reducing liquidity. Lower liquidity could lead to wider spreads, making it more expensive to trade most currency pairs. It could also cause slippage, where your orders are executed at worse prices than you initially expected, primarily if you use market orders.

Increased volatility

Given that fewer traders are usually in the market during off-hours, any trade made could significantly disproportionately impact market prices, triggering increased volatility. Higher volatility could be a risk or an opportunity, depending on market conditions. While it could lead to massive profits, it also increases the probability of losses, especially when a trader needs to prepare or use proper risk management strategies.

Market gaps

Market gaps occur when the forex market opens after the weekend or holidays. However, they could also happen during off-hours because of significant news events or economic data releases in other time zones.

 

Gaps could lead to massive losses if the market opens much higher or lower than the previous closing price. This is especially true for traders who tend to hold their trades over the weekend or have tight stop-losses within the market gap.

Slippage

Slippage occurs when your trade order is executed at a price different from what you initially expected. Due to reduced market liquidity, it is more prevalent during off-hours. Slippage can affect trades' anticipated entry or exit points, leading to higher costs and lower profits.

Limited economic releases

Major economic releases are released during the main trading hours in each forex market. Hence, during the off-hours, the effect of economic news might be delayed until more traders are active in the market. Therefore, traders operating during off-hours might miss the immediate volatility and multiple trading opportunities after economic data is released. The delayed market reactions may also catch the traders off guard.

Potential rewards of trading the market during off-hours

Opportunity to capture significant moves

Economic data and news events during off-market hours for a specific region may impact currencies paired with currencies from another area. Hence, traders can position themselves to take advantage of significant market moves due to the releases. For example, a trader could capitalise on an employment report from Australia released during the Sydney session, which could impact the AUD/USD pair despite the closed New York market.

Less competition from major players

Retail traders may have an easier time spotting and exploiting market trends without leading institutional traders and significant hedge funds, which tend to impact currency pairs significantly but are typically less active during off-hours.

 

A retail trader may discover more predictable patterns in major currency pairs, such as the GBP/USD and the EUR/USD, during the Asian session, when American and European traders are less active.

Benefit from overnight swaps

Forex trading is all about exchanging currencies and their interest rates; hence, holding a currency pair overnight could result in the receipt or payment of a swap rate due to the interest rate difference between the two currencies that make up the pair. Therefore, traders with an excellent understanding of interest rate trends and differentials could hold currencies with favourable swap rates overnight to earn interest on their trades.

More time to analyse and plan

Trading during off-hours can offer traders a quieter environment, giving them more time to analyse different trade setups without the added pressure of the rapid price movements seen during regular trading hours. This can be especially useful for part-time traders.

 

A trader could use the Asian session to analyse the market and plan their trades in readiness for the opening of the London session to take advantage of the higher liquidity and volatility needed for the success of specific trading strategies.

Volatility

The higher volatility usually present during the off-hours can be a blessing and a curse. Traders who know how to deal with volatility can benefit from the significant price movements within short periods, potentially leading to higher returns. Day traders and scalpers may find the volatility witnessed at the London session opening and the overlap with the Asian session incredibly lucrative.

Role of news releases

News releases play a critical role in off-hours trading as they usually lead to high volatility, which, as discussed above, can be a double-edged sword. Experienced traders could benefit from the increased volatility after scheduled releases during off-hours. On the other hand, traders with less experience may find it difficult to trade the increased volatility created by news releases in the off-hours market.

Risk management

Risk management is critical to your success as a forex trader, regardless of the forex market session that you are trading. You should always apply proper risk management strategies when trading, despite your trading strategy. Let's look at risk and position sizing during different market sessions.

Forex trading in different sessions

As mentioned above, there are four distinct forex trading sessions and trading each of these sessions requires a solid understanding of their inherent characteristics. Below, we delve deeper into the key elements of each of the four sessions.

Asian session

The Asian session tends to have much lower liquidity and volatility; hence, traders must use broader stop-loss orders to avoid having their stops hit and their trades closed prematurely. Due to the lower liquidity, traders in this session should be wary of significant moves in many currency pairs and broader spreads. All these factors must be considered when developing a risk management strategy for the Asian market.

London session

The London session tends to be the most liquid and busiest trading period and is characterised by lower spreads despite higher volatility. However, traders must always look out for sudden, massive moves triggered by UK and Eurozone releases before the New York session opens and the ensuing overlap. Due to the increased liquidity and higher volatility, traders can have much tighter stop-loss orders. However, the volatility could lead to losses as prices whipsaw on significant announcements.

New York session

The New York session offers traders the most opportunities, especially during the overlap with the London session. Several economic releases from the US docket usually occur early in the session, leading to higher volatility, which creates numerous trading opportunities. Traders can use all types of trading strategies during this session. The risk management strategies will also vary between trading styles, as scalpers and day traders have more minor stops than swing traders.

Strategies for volatile and illiquid hours

During volatile and illiquid hours, the best trading strategies are short-term, like scalping to benefit from fast moves. One can also trade long-term, so long as they place a significant enough stop-loss order to give the trade enough room to move around. Overall, trading during volatile and illiquid hours is much riskier than at other times; hence, traders should always be alert.

Forex trading in different countries

The forex trading industry in many countries differs. Traders in each country have unique perspectives as they trade the market at different times based on their country's time zone. Therefore, we shall look at forex trading in several countries to see their similarities and differences.

Forex in key markets

Here, we shall cover forex trading in several leading countries in the industry. Each of these countries has a unique approach to the forex market, but there are also multiple similarities that we shall also cover in this section.

Forex trading in the United Kingdom

Forex trading is a popular activity that attracts numerous participants. The Financial Conduct Authority (FCA) is a Tier 1 regulator overseeing the UK forex market. The FCA ensures that all traders are protected from fraudulent firms and that licenced firms adhere to its rules. Participants in the UK forex market include both retail and institutional traders.

 

UK traders can trade the forex market using either contracts for difference (CFDs) or spread betting, a tax-free trading strategy. Trading with CFDs attracts capital gains tax, but one can also offset their losses.

Forex trading in Australia

Forex trading in Australia is a popular activity attracting local and international participants. The Australian Securities and Investments Commission (ASIC) is a Tier 1 regulator that effectively regulates the forex market in Australia. The ASIC issues an Australian Financial Services Licence (AFSL) to all brokers operating in the Australian market.

 

Forex trading in Australia is considered a taxable activity, and the Australian Taxation Office (ATO) considers forex trading gains as assessable income. Hence, traders must report these gains on their tax returns. The forex market in Australia attracts retail and institutional traders who want to take advantage of the opportunities present in the market. Traders should use proper risk management strategies in the Australian market, which can be highly volatile after news events.

Forex trading in South Africa

Forex trading in South Africa is prevalent, especially among young people. The Financial Sector Conduct Authority (FSCA) oversees the forex market and ensures that all forex brokers within the nation abide by its strict regulations. The forex market in South Africa attracts both retail and institutional traders in equal measure. Profits from forex trading in South Africa may be subject to income tax.

Regulatory considerations and high-volume periods

Some of the regulatory considerations that traders in each country must consider include whether their preferred broker is regulated in their country. Being locally regulated means you can report your grievances to your local authorities with the broker and expect them to be resolved.

 

It would be best to consider whether the forex broker is subject to Tier 1 regulation, which denotes their commitment to upholding the strictest regulatory standards globally.

 

Forex traders should also be aware that trading during high-volume periods such as the New York-London overlap can be advantageous while posing a significant risk due to rapid price movements.

Unique country-specific factors

Some unique country-specific factors, such as elections and high-impact economic releases, can significantly impact the affected currency pairs, regardless of the current forex market session. In most countries, election outcomes, such as former US President Donald Trump's surprise 2016 election win, significantly impact their currency.

 

Other times, when significant news releases exist, the affected currency pairs could experience a significant price move despite the current session. For example, the AUD/USD currency pair could experience a massive price move after a critical economic announcement, such as the GDP, inflation, and jobs data. A central bank announcement could also have a significant impact despite the Sydney session's low trading volumes.

ThinkMarkets forex trading platform operates 24/5

Yes, the ThinkMarkets forex trading platform operates 24/5, allowing traders to enter and exit their trades anytime within 24 hours. Since we offer all these sessions to our clients, traders can choose whether to trade the Sydney, Tokyo, London, or New York sessions. You can learn more about our market hours and forex trading offerings.

Conclusion

The forex market is open 24 hours, five days a week, but the 24-hour session is split into four. The first is the Sydney session, followed by the Tokyo session, the London session, and finally, the New York session. The most liquid session is the London session, which overlaps with the New York session. Traders should customise their trading strategies based on the liquidity levels during their trading session. Some sessions have high volatility, which can be both a blessing and a curse since it triggers sudden price moves in some currency pairs. Understanding the four forex market sessions and their characteristics is crucial to your success as a trader.