Why currency trading is a 24-hour business
Forex markets are open across different countries worldwide during their local business hours. Forex can be traded online in various exchanges across the world and, unlike the stock markets, don’t close at the end of each trading day.
With the many time zones around the world, this means that forex trading is a 24-hour business. You can trade currencies online five days a week.
What is forex trading?
In forex trading, you would buy or sell a currency pair with the aim to profit from any change in one currency’s exchange rate against another. Take GBP/USD for instance.
Currency values change based on several factors. These factors include central bank decisions, interest rate changes, and market speculation. A country’s economic health also impacts the value of its currency.
There are several ways in which a trader can take part in the forex markets. Forex traders often trade currency as a spread bet or contract for difference (CFD) – a form of financial derivative trading. CFD trading is available in the forex markets across many countries.
In a currency pair, if you believe the value of the first (or base) currency in a pair will rise against the second (or counter) currency, you would buy the currency pair. If you think the price of the base currency will fall against the second currency in the pair, you would sell.
When a trader places a spread bet or enters a CFD trade, they are trading based on the price of the underlying instrument. In the case of forex trading, this means traders don’t need to own the physical currency they are trading. They are simply speculating on whether the expect the first currency to rise or fall in value against the second currency in the pair.
How large is the forex market?
The forex market has an average traded value of trillions of dollars a day in trading volume. Trading volume in the forex market comes from several sources. These sources are institutional investors, corporations, governments, banks, and retail traders. Almost 90% of volume in the forex market comes from retail traders. These traders often speculate on intraday or short term price movements.
What are the main currency pairs?
There are seven main currency pairs traded in the forex market. The major currency pairs are EUR/USD, GBP/USD, USD/CHF, and USD/JPY. The other main pairs are AUD/USD, NZD/USD, and USD/CAD.
The major pairs and commodity pairs are the most widely traded pairs in the forex market. These pairs usually have the largest volume of buyers and sellers. Forex trading is always undertaken in pairs and the US dollar is the most traded currency in the market.
Any currency pair that has USD is called a major pair.
When are the major FX markets open?
The major forex markets are open 24 hours a day, five days per week. The four major forex sessions are in Sydney, Tokyo, London, and New York. Each trading session generally opens at 8am and closes at 4pm local time. To determine when each trading session is open in your time zone, you can use a time conversion tool or world clock.
The busiest times during the trading day are when two major sessions are open at the same time. Market volume is high and big moves occur at these times in the trading day.