Does the Forex market observe closing hours? The answer is yes, but there's more to it.
Official Hours vs. the Real Trading Day
Officially, Forex trading is open 24 hours a day, 5 days a week. This means it "closes" on Saturdays and Sundays. However, traders know that there are also unofficial or sui generis closures and openings. These times, to be precise, correspond to periods of the day when trading is almost useless, if not harmful. The matter is further complicated by one fact: these unofficial closures are "variable," meaning they change depending on the currency pair being traded. For a trader investing in EUR/USD, the market may appear closed, while it may appear open for a trader investing in USD/JPY.
The raison d'être of this dynamic is simple: Forex, like all other markets, follows the opening and closing of stock markets, or "exchanges," so to speak. Therefore, if you invest in the euro or the dollar, it's pointless to trade at two in the morning when both the Frankfurt and New York stock exchanges are closed. This small rule finds its exception on special days, for example, on nights following elections and characterized by the reading of vote counts. In those instances, even if it's late evening in the United States and the middle of the night in Europe, the markets - including Forex - are very active.
Trading Hours of the Main Financial Centers
To get an idea, it's good to list the main stock markets and their trading hours.
The earliest market is Sydney, which opens before midnight (precisely at 11 PM) and closes at 8 AM. It's the least important market, with the lowest liquidity.
Next is Tokyo, which opens at 1 AM and closes at 10 AM. It's often the first testing ground to gauge the effect of special events that occurred overnight.
Then it's the turn of London and Frankfurt, which open at 9 AM and close at 6 PM.
Finally, there's New York, which remains open from 2 PM to 10 PM. For a closer look at how these overlapping sessions affect volatility, see forex market hours.
A Note on Time Zones
Obviously, the times listed here correspond to Italian time, which is indicated internationally by the abbreviation GMT+01:00. It's important to note that all markets, according to local times, open at 9 AM and close at 5 PM.
