Foreign Exchange Markets: 24-Hour Trading

Foreign Exchange Markets: 24-Hour Trading

The foreign exchange market (Forex) is open and active 24 hours a day from Monday morning in New Zealand until Friday night in New York. At any given moment, currency trading desks in dozens of world financial centers are open and active in the market.
Currency trading does not stop even on holidays when other financial markets, such as stocks or futures exchanges, are closed. Although it is a holiday in Japan, for example, Sydney, Singapore and Hong Kong may remain open. The only common holiday around the world is New Year’s Day, and even that depends on what day of the week it falls on.
There is no officially set time for the start of the trading day or week, but for all intents, the market action begins when Wellington, New Zealand, the first financial center west of the international data line, opens Monday morning local time. Depending on whether or not DST is in effect, it roughly corresponds to early Sunday afternoon in the Americas, Sunday evening in Europe, and very early Monday morning in Asia.
Sunday’s open marks the starting point when currency markets resume trading after Friday’s close for North American trading (5pm ET). This is the first opportunity for the forex market to react to news and events that may have occurred over the weekend. Prices may have closed New York trading at one level, but depending on the circumstances, may start trading at different levels at the opening on Sunday. The risk of currency rates opening at different levels on Sunday versus closing on Friday is referred to as the weekend gap risk or the Sunday open gap risk. A gap is a change in price levels where prices cannot trade between them.

As a strategic trading consideration, individual traders need to be aware of the weekend gap risk and know what events are scheduled over the weekend. There is no fixed set of possible events, nor is there any way to rule out what might happen, such as a terrorist attack, geopolitical conflict, or natural disaster. You just need to realize that the risks are there and take them into account in your trading strategy.
On most Sunday open days, prices generally rebound from where they left off on Friday afternoon. The opening spreads will be much larger than usual because only the Wellington and 24-hour trading desks are active at that time. When banks in Sydney, Australia and other early Asian centers enter the market over the next few hours, liquidity begins to improve and spreads begin to narrow to more normal levels.
Due to the wider spreads in the early hours of Sunday’s opening, most online trading platforms do not start trading until 5pm. ET on Sunday, when sufficient liquidity will enable the platforms to submit their regular bids. Make sure you know your broker’s trading policies regarding open Sundays, especially with regards to order execution.