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Over $6.6 trillion in currency options are being bought and sold each day around the world. This gives you an idea of how much trading is taking place and how essential it is for many businesses.
Despite a shaky and volatile past year, the forex market continues to grow. If you feel this market is right for you, you need to do some research and learn a bit about how it works. The foreign exchange market being open 24 hours a day is one of the most important benefits of using this market.
Keep on reading to learn more about why forex never sleeps and how you can trade forex around the clock.
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The foreign exchange market (or forex market) is one of the most actively traded markets. This 24-hour market allows banks, companies, and individuals to trade currencies. Currency is always in demand for international trade and global businesses.
The market is based on different geographical trading sessions that allow you to trade 24 hours a day, 5 days a week. At some point during the day, you will be able to find one market. You can also take advantage of two markets open at the same time.
Countries have their currencies that vary based on their economic situation. Some countries base the value of their currency on another country. For example, the currency of Belize is worth one-half of the value of US currency.
Other currencies are floating that change constantly depending on economic factors, financial markets, political situation, and inflation. The supply and demand of the currency also impact the value of the currency.
This 24-hour exchange market allows you to trade from 10 pm GMT on Sunday continuously through the week until 10 pm GMT Friday. The market is open because of the high demand for currency by central banks, governments, and multinational companies.
For those traders that are day trading in the stock market, they are limited to certain hours. For example, the New York Stock Exchange is open from 9:30 to 4 pm ET. If you have a full-time job, day trading on the stock market is difficult to manage.
With forex markets, you can trade any time of the day. Every day, the forex markets in the world open in Australia/New Zealand, Asia, Europe, and then North America. It’s a great opportunity for investors who are beginners or those who want that flexibility.
The different trading sessions allow traders to pick a time that works for them. There are 4 main trading sessions:
The different trading sessions have different volatility and liquidity that will impact your trading strategy. If you choose to trade during the main forex markets like London and New York, you’ll have the advantage of reduced spread and increased volatility. Whether this is something you are interested in depends on your trading strategy.
There are times when the trading sessions overlap. This is when the exchange market is more active with higher trading volume. The increased activity takes place if the currencies you want to trade are from markets that are open at the same overlapping time.
For example, both European and US sessions are open between 8 am and 11 am EST. At this time, you will find that there is a greater trading volume in EUR/USD. The Tokyo session also has an overlap with the Sydney session from 7 pm to 12 pm EST.
Exchange market options are derivatives or futures trades based on underlying currency pairs. Your trading strategy will depend on the currency pair being traded. The most active period starts when the London session opens and overlaps with the New York session.
A forex currency pair has greater liquidity if at least one of the markets is open. For example, if you want to trade US currency and Japanese yen, you want to make sure that either the US or Tokyo session is open. USD/JPY will be most active when the US or Tokyo session is open, and not as active when the European session is open.
The London and New York sessions are more liquid and also more volatile than other overlapping sessions. Some traders prefer high volatility, but it’s a consideration that you need to take into account as you develop your trading strategy.
As you start, you need to do some research or even join a demo account to better understand overlapping sessions and how it impacts your trading strategy. Using forex calculators such as the forex margin calculator is also a great tool for beginners to understand trading account leverage.
Even if the forex markets are open all day, your trading strategy needs to consider liquidity and volatility. Trading all day may not work for you and may not make any sense as a trading strategy. For most of the day, there may not be enough activity or any big market movements that you can capitalize on.
Trading doesn’t stop on local holidays. You still have the liquidity to buy and sell currency pairs. There are some global holidays where there is no liquidity, for example, the Russian markets on Orthodox Christmas.
Forex markets are based on 4 major geographic trading sessions, including Sydney, Tokyo, London, and New York. Since the market is open 24 hours and five days a week, it gives you the flexibility to trade at your schedule. If you are just starting out or forex trading as a side hustle, the hours give you more opportunities to learn and trade.
With Baxia markets, you can create an account and start trading immediately. We offer the most popular forex trading platforms, including MetaTrader 4 and MetaTrader 5. If you’re just starting out, open a demo account and use our resources to start learning.
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