Critical Trading Times and Why

The Foreign Exchange market as we know, does not close intra-week – meaning it is virtually open 24-5. On the contrary, stock markets have a closure period (even precious metals) at 11pm, London GMT.

The beginning of the trading day starts in Asia (Tokyo) at 00:00am London time as their desks open for business – following with the Aussie traders 30 minutes later also. The Aussie and Asian session pretty much intertwine with each other as they have a very short difference in their opening hours and off course close at the same time – which is 6am London time. Even though London is the home for Foreign Exchange, our sleeping hours tend to adopt volatility on certain days. It’s simply due to the fact that the Asian and Australian investment banks/hedge funds/ commercial banks are engaging in their normal day-to-day transactions in their morning/afternoon – and we will sometimes wake up here in London to realise that AUDUSD for instance has declined 50-60 PIPs after the New York close (caused by the activity of these international firms).

Now for those that are in the UK, the first period that all traders should take into consideration is the London session at 8am. Bare in mind that there is a 2 hour difference between the Asia/Aussie close and the London open (meaning no overlap between the London session with the Asian and Australian). The traders in Tokyo and Melbourne have already left their desks at this point, we now have the London open at 8am – following the European open at 9am (current timing difference of today). This evidently means that we have a smooth overlap with the London and European session. The conventional notion is that we witness a large amount of volatility on the major foreign exchange markets – and offcourse the UK and European Index’s as the London open occurs. However, major market participants actually provide liquidity into the market prior to the London open which is significantly crucial to take into account – specific timing of liquidity entering into the market is covered in the booklet guide of Golden Seeds FX.

Why Is This Important?

This is absolutely crucial because on each given day we have either a significant demand or a supply of a particular currency – the one obviously significantly demanded tends to appreciate relative to it’s counter-part. All of these institutions view currency as a ‘’store of value’, the main market participants make decisive decisions long before the UK session even opens in terms of which currency they see as a valuable currency for the day – or maybe even for the next few days.

Now as we progress into the London session from 8am onwards, there are some critical time periods, which occur throughout the day. The first period is from 1pm. This is also a second period in which a large amount of liquidity and volume re-enter into the market. As a result, we usually tend to witness a higher velocity in price movement – compared to previous trading hours.

Not to mention that 1pm in UK is 6am in New York – which is precisely 3 hours and 30 minutes minutes away from the official New York open at 2:30pm, London time. As you might have guessed, the period from 1pm onwards holds it’s significance due to the fact that the UK, European and US are actively open and at their desks trading.

The period from 1pm onwards is the overlap period in which the UK and US are trading in the foreign exchange markets simultaneously – off course up until the UK session has ended. This is also the period in which the most liquidity and volume has been re-entered AGAIN into the markets.