Stock trading and forex trading are altogether two totally different beasts. Stock exchanges are open only for a fixed time each day. You can only trade stocks during this time. On the other had the forex markets are open 24 hours, 5 days a week.
Continuous 24 hour action at the forex markets baffles many new traders. Forex markets have no central exchange. It is an Over the Counter (OTC) market that is spread over various locations in the world.
For a new forex trader, it becomes very difficult to understand when to trade and when not to trade as there is no formal open and close of the market. Many exhaust themselves by sitting in front of their computers all day. Fatigue them and make wrong decisions. An easy way is to divide the day between three 8 hour sessions.
Again divide each 8 hour session in 4 hours by using 4 hour charts. As you will read this article, I will explain how this division is logical and can help you understand the forex markets. Forex markets are basically controlled by three money centers and these three sessions will help you identify the risk appetite and the price action for each.
The three money centers are: Asia, London and New York. Each session is going to coincide with these three money centers. We will call each session as the Asian, the London and the New York Session.
Asian Session: Most of the turnover in this market session is handled by Sydney, Tokyo, Hong Kong and Singapore. Main players are the commercial exporters and the respective central banks. Since most of these central banks are in competition with one other, the price action during this session is jumpy and unsustainable.
London FX Market Session: London FX Market is by far the most well developed and highly liquid market in the world. Due to the depth of the London market, the price action that takes place during this time forms the major moves that are going to continue for the rest of the day. These price moves tell you about market sentiments and the trend.
New York Session: New York comes as the second forex center after London. Both these markets overlap in the morning when New York is opening and London is closing. This is the time when lot of action takes place.
The following table gives important times of the day that any forex trader needs to know: 00:00 GMT-Sydney Opens. 11:00 GMT-London opens. 15:00 GMT- London becomes very active. 17:00 GMT- London is active and New York opens. 18:00 GMT- London and Europe closes. 19:00 GMT- New York and Chicago getting ready for a close!
This overlapping between London and New York is when major price action takes place and new trends are formed or old trends are reversed. London is the market trend setter in fashion as well as forex.
Continuous 24 hour action at the forex markets baffles many new traders. Forex markets have no central exchange. It is an Over the Counter (OTC) market that is spread over various locations in the world.
For a new forex trader, it becomes very difficult to understand when to trade and when not to trade as there is no formal open and close of the market. Many exhaust themselves by sitting in front of their computers all day. Fatigue them and make wrong decisions. An easy way is to divide the day between three 8 hour sessions.
Again divide each 8 hour session in 4 hours by using 4 hour charts. As you will read this article, I will explain how this division is logical and can help you understand the forex markets. Forex markets are basically controlled by three money centers and these three sessions will help you identify the risk appetite and the price action for each.
The three money centers are: Asia, London and New York. Each session is going to coincide with these three money centers. We will call each session as the Asian, the London and the New York Session.
Asian Session: Most of the turnover in this market session is handled by Sydney, Tokyo, Hong Kong and Singapore. Main players are the commercial exporters and the respective central banks. Since most of these central banks are in competition with one other, the price action during this session is jumpy and unsustainable.
London FX Market Session: London FX Market is by far the most well developed and highly liquid market in the world. Due to the depth of the London market, the price action that takes place during this time forms the major moves that are going to continue for the rest of the day. These price moves tell you about market sentiments and the trend.
New York Session: New York comes as the second forex center after London. Both these markets overlap in the morning when New York is opening and London is closing. This is the time when lot of action takes place.
The following table gives important times of the day that any forex trader needs to know: 00:00 GMT-Sydney Opens. 11:00 GMT-London opens. 15:00 GMT- London becomes very active. 17:00 GMT- London is active and New York opens. 18:00 GMT- London and Europe closes. 19:00 GMT- New York and Chicago getting ready for a close!
This overlapping between London and New York is when major price action takes place and new trends are formed or old trends are reversed. London is the market trend setter in fashion as well as forex.
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in Investing, Stocks and Forex Trading. Discover a revolutionary new Forex Robot.
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