One of the hyped facts about the forex trading by the brokers is the market hours. The currency market is publicized as 24 hour market. Many people naively trade the currencies believing that they can get good returns merely because they can trade for more time. But traders especially the beginners need to know the facts. You should understand the true Forex market hours.
Three Pillars of the Forex Market Day
Forex market hours are divided into three sessions. The three sessions are called Asian, European and US sessions. The names are given according to the peak activity of particular region. During the Asian session, the Asian markets are very active. European and US session follow the similar pattern. Each session overlaps with the next session meaning that during this period two sessions are active at the same time. During these overlap times, you will find that the activity in the market is increased because more people are active. Also normally during each session, the activity in the local currency is at the peak. You will find that Euro and Pound are traded heavily in the European session.
Lack of Market Activity
The forex market hours start in Sydney on Sunday evening or night depending on where you live. It closes on Friday when New York closes. So it is open 24 hours. But you should understand how it will benefit you as a trader. Despite it is open 24 hours, you can see minimum activity during certain time of the day. The time between New York close and Sydney open is very dormant as compared to other times. The liquidity during this time is thin. Market moves mostly because of the trades facilitated by the businesses and not the traders.
The cost of the trade should be less especially if you are a scalper. During the overlap time the cost of the trade is usually high due to low liquidity. You have to pay the spread of 4-5 pips even on major pairs like EUR/USD. High spread may trigger your orders falsely. If you have placed a pending order to buy, it might get triggered due to high spread. At other times this trade may not have happened. You need to take into account this fact. It is not profitable to trade the market any time of the day.
Market with Low Volume
For profitable results, you should trade only during the busiest forex market hours. During the active market you get the volatility. If you want to make money, you should play when there is volatility in the market. High volatility times are towards the end of Asian session and entire European and US session. The market is calm during other times. You need to wait for the market to pick up the things.
It is the fact that forex market is open 24 hours. But forex market hours should not be the reason why you should trade the forex. You should know the fine details of the market. You will know these details as you spend time in the market. So it is advisable not to trade with real money until you know the stuff completely. Till then trade with the paper money.