The Forex market is open 24 hours and is accessible to individuals 5 days in 7. However there is a strong variation of the activity according to the timetable. It is therefore important to study the daily cycle in order to intervene in better conditions.
By studying the geographical distribution of transactions, we see that London, with 32% of transactions, has the most important market place in Forex.
This is mainly due to the fact that London is the historic market place of Forex.
If we add London transactions to those of other European countries, London makes up approximately half of the transactions that are performed in Europe, so it makes sense to find the highest activity during the European session here.
Large financial institutions often have three teams of eight traders – a team is placed in London, one in New York and one in Asia (Singapore or Tokyo). When a session ends, traders submit their orders (open positions and pending) to the next team.
The trading day starts around 07:00 in Europe (London time, as all the hours listed below), traders test the market and begin to build their positions for the morning or the day.
Between 09:00 and 10:00, the European economic data is published, such as the IFO index, the ZEW, industrial controls, PMI.
The market is then quieter until 13:00, when traders from New York begin to take positions. The majority of U.S. economic figures are published at 13:30 (growth, unemployment, inflation …) and others at 15:00 (ISM, home sales …). This is when the activity is highest.
At 17:00 activity begins to decrease sharply with the European session ending. In the afternoon, in the U.S., the market is quieter.
The activity further decreases sharply with the end of the U.S session around 21:00.
Some places in Asia begin to work towards 21:00 to 22:00 but the activity begins to restart instead between midnight and 01:00.
The market is then quieter between 03:00 and 06:00 because of the lunch break on the Asian markets and the afternoon is often uneventful.
Then London traders come in and a new cycle restarts.
Activity is relatively concentrated in the European session and peaks during the overlapping period of European and American session.
Depending on the trading style practiced most suitable hours will be chosen. A scalper (trader who makes a lot of positions of very short duration) will focus on the European session. A medium term trader may prefer to get in position during less volatile phases, that is to say the early morning during the Asian session.