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What Is FOREX?

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This chapter is from the book


The very same characteristics of FOREX that make it a unique alternative for speculators also create a complicated and treacherous marketplace for those who aren’t fully prepared. For example, the FX markets are available to traders continuously, 24 hours per day, five and a half days a week. Specifically, trading begins at 20:15 GMT on Sunday and ends at 22:00 GMT on Friday. The lack of downtime is convenient and enables traders to react to world events in real time, unlike stock traders, who have to wait for the morning open of the U.S. trading session. Yet, day and night market access also encourages poor sleeping habits by die-hard FX traders, and this could promote unfortunate decision-making and large losses. On a social note, it is also probably the root of many failed marriages.

Although FX is open for trade 24 hours per day, there are certain times at which more trading activity occurs, thus providing favorable market conditions for speculators. Liquidity in the FOREX market travels across the globe with the time zones.

From the perspective of a trader located in the United States, the trading day actually begins the night before in Sydney, Australia at 5:00 p.m. Eastern Standard Time (EST); however, liquidity doesn’t tend to show up until the Tokyo open a few hours later. At 3:00 a.m. EST, the London markets open, and finally the U.S. market officially opens at 8:00 a.m. local time in New York City. As you can see in Table 1-1, there is plenty of action around the clock, but that doesn’t necessarily mean you should always try to take advantage of it. The most liquidity can be found during the overlapped time between the London and the New York sessions, or approximately 8:00 a.m. to 12:00 p.m. Eastern Standard Time.

Table 1-1 Trading Day Begins with Sydney at 5 p.m. EST and Ends at the New York Close at 5 p.m. EST

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