Working as a Forex trader can see you working all sorts of crazy hours, if you don’t have a good work schedule in place. The Foreign Currency market is open round the clock, so when you first start in this profession, it’s easy to work long and crazy hours.
Watching the market from 3am through until midnight, 6 days a week isn’t the ideal working hours for anyone. Not to mention the fact that if you were to work the long hours, it’s inevitable that you’ll experience burnout at some stage and it probably won’t take long either.
It’ll also affect your judgement when it comes to trading and could lead to financial ruin, due to excessive trading, or even worse…emotional trading, when you run into losses and try everything possible to boost your returns.
To avoid that happening, it’s essential to have a good understanding of the different trading hours there are.
The New York stock exchange is one of the most influential markets in currency exchange rates, due to the power of the US Dollar. The USD is estimated to account for 90% of all trades, which makes it an extremely powerful trade to watch or trade using. The stock exchange operates trading hours from 8am to 5pm Monday through to Friday.
The Tokyo stock exchange operates from 7pm to 4am and is responsible for the bulk of all Asian currencies, with the central denominator being the Bank of Japan, having the most influence on the exchange rates. The most popular trades taking place in this market is the USD and the GDB to the Japanese Yen. (JPY)
The Sydney Stock Exchange is the first to re-open the market on a Sunday afternoon, when it opens at 5pm running through to 2am. It isn’t the largest of markets, although it does see a lot of trades taking place on the Sunday, when traders will exchange currencies to stabilize accounts, after fluctuations from the close of trading on the Friday afternoon.
The UK is the dominant stock exchange affecting worldwide markets. London is considered the trading capital of the world, accounting for around 34% of all global trades. The most influence on the exchange comes from the Bank of England, responsible for the UKs monetary policies. It’s worth noting that any currency trends tend to originate from the London stock exchange, taking a ripple effect on currencies worldwide. Trading begins at 3am, closing at 12pm.
To trade all four stock exchanges would be impossible to do yourself, as it operates around the clock. Therefore, the only way to profit from all currency trading hours, is to take advantage of the overlapping hours they all have in common.
From 8am to 12pm is when New York and London overlap. That’s when there’s high movement in the USD and GBP currencies. Due to the power of each currency, it’s usually the hours that part-time FX traders will be most active. Between the hours of 2am and 4am is when Tokyo and Sydney overlap.
While the two are smaller stock exchanges, there is potential for profit from trading with the currencies of the two countries. The Australian Dollar and the Japanese Yen. AUD/JPY. London/Tokyo overlaps between 3am and 4am, with New York and the London stock exchange both closed, leading to less fluctuation, as the market will be stabilized at these hours.
From the open trading hours of the worlds four stock exchanges overlapping at certain times, it creates opportunities. From 8am to 12pm Monday to Friday are the strongest times to trade currencies, although it’s going to be geared towards short-term trades, due to the fluctuations.
As thing stabilize going into the afternoon, that’s when traders can make day trades, influenced by the trends from the most active hours.
Combining the two FX trading strategies, alongside the overlapping trading hours of the London and New York stock exchanges is how many FX traders workout their trading schedules.