Forex Trading Day
In terms of the Forex market, liquidity is substantial part of how profit is generated and how quickly prices adjust to changing demands. One of the main factors that influence liquidity within the industry is the way in which trade is carried during a 24-hour period.
The Forex Trading Week begins on Monday morning in the Asia-Pacific time zone. It gradually commences throughout the world, and works as a 24-hour cycle throughout the working week, terminating at the end of business hours in New York at 5pm eastern time, on Friday afternoon. Because Forex is a globalized form of trade, it remains open regardless of public holidays, with the exception being New Years Day, depending on the day of the week it falls on.
Officially the opening of the Forex Trading Day is not determined by law, but it is generally established by the first financial centre west of the international date line, in Wellington, New Zealand. Dependant on daylight savings, this is usually still Sunday in North America and Europe, and early Monday morning in Asia. This means that although the Forex Trading Day officially closed on Friday afternoon in North America, trading commences as early as early Sunday afternoon, allowing companies to adjust their trade levels depending on changes and fluctuations during the weekend.
The main centres of trading within the Asia-Pacfic session are Wellington, Sydney, Tokyo, Hong Kong and Singapore. The largest market share in this region belongs to Japan, and this is the core area of focus in terms of the global Forex market. Price movements in terms of the Yen are a good indicator of how the Japanese market is performing, focusing specifically on currency pairs such as USD/JPY and Japanese Yen crosses, such as EUR/JPY and AUS/JPY. 21% of the total daily volume of Forex trading occurs in the Asia-Pacific region.
As trade in the east progresses, half way through the day the European trading session begins. The region makes up 50% of all global trade, with London alone responsible for 30% of all international Forex transactions. One of they key factors influencing liquidity in the European market is the fact that it overlaps both North American and Asia-Pacific trading sessions. The period of overlapping trade days is where most global Forex trading takes place. Market news is released in the early hours of the morning in the European Forex Trading zone, and substantial moves take place amongst the European GBP, EUR and CHF, as well as cross-currency pairings such as EUR/CHF and EUR/GBP.
The North American session, which makes up 22% of all global trade begins in the middle of European trading day. Most trade occurs in the early hours, when the global Forex market is at it’s peak. As the European session winds down, liquidity in the North American market subsides, which makes for formidable trade conditions.
Although Forex Trading is the principal form of global trade, it is important to remember other markets, such as oil, gold, stocks and bonds, and keep in mind that they may correlate. Although they do not neccessarily influence on another directly, it is important to keep and eye on what goes on in other forms of financial trading, to be able to foresee changes in the market.