Wednesday, September 5, 2012

Understanding The Forex Time Zones

You want to trade currency, because you understand it's markets are a 24 hour 6 days per week markets that are liquid to the magnitude of about 4 TRILLION DOLLARS daily. You also understand that there are four primary sessions, world time clocks, and Greenwich Mean Time GMT to consider. Add to these a little trick called daylight savings time and you can become a bit confused.
While understanding session times is seems daunting at first, learning them will improve trading outcomes. There are four sessions that can be considered major sessions.
The Forex week begins Monday morning at 8:00 am in Sydney Australia ( 5:00 PM Sunday eastern standard time; 9:00 PM Greenwich mean time). Think of Sydney as being the start of the Forex day. The Tokyo session opens three hours later. The London session opens 7 hours after that and finally the New York session opens 5 hours later. Each session runs nine hours. So:
Sydney runs from 9:00 PM till 6:00 AM GMT
Tokyo runs from 12:00 AM till 9:00 AM GMT
London runs from 7:00 AM till 4:00 PM GMT
New York runs from 12:00 PM till 9:00 PM GMT
NYC is in the Eastern Standard Zone see below
If it helps see it this way as an example of the conversion necessary:
New York opens at 8:00 am to 5:00 pm EST (EDT),
Tokyo opens at 7:00 pm to 4:00 am EST (EDT),
Sydney opens at 5:00 pm to 2:00 am EST (EDT),
London opens at 3:00 am to 12:00 noon EST (EDT).
Here is a helpful chart reproduced from The site is a wonderful source, having as much information about the GMT as any self- reliant trader will ever need. Another even more interactive chart can be found here AT Live Forex Market Hours Monitor. The real beauty of the web to me is that information is accessible to anyone and everyone in the way you best can accept it.
You need to know the number of hours your current time zone is away from GMT. Then know the GMT time for the session or sessions you wish to trade and make a simple addition or subtraction. Example (USA EST NYC ) is 5 hours earlier than GMT So to trade the open of the London (8:00 am )session need to be ready to go at 3:00 am EST. I learned to convert my from review of the Forex Factory sessions chart. It's easy to remember if you do it this way. Another way to get good at it is to download an app to your smart phone called the world clock. Set the clocks for the cities of the zones and you do not need to even think... you can spend more time on AG homework.
One more important aspect to calculating the sessions is the topic of DST. In March April of each year a majority of the world observes Day Light Savings Time (DST) until September November. The tricky issue is that one of the four major sessions is located in a city that does not observe it. (Tokyo) has no DST in 2012. More over,the directional movement of the clocks is not uniform either. Here is the line up for 2012. It is also subject to change every year so you must check every year.
Sydney Oct 6th 2:00 am move clocks forward to 3:00 am
Tokyo No DST in 2012 so you will need to verify each year
London Oct 28th Move clocks backward to 1:00 am
NYC Nov 6th Move clocks back to 1:00 am
This year in the USA DST began on March 11th 2012 at 2:00 am and DST continues until November 4th 2012 at 2:00 am. You can always remember how to move your clocks with the phrase Spring forward Fall back in Western Hemisphere meaning to always set time ahead one hour and set time back in November. Now since the dates are not uniform and there is not room in this brief article to fully address every time zone for all of our many ACE Gazette citizens I am providing an all-inclusive comprehensive link to more about DST than any trader could ever wish to know. So as DST approaches check in and get it right. You can always consult a world clock site.
Each trading session has a personality and unique characteristics that you should learn. One of the most important is volatility or as I call it "pip swings". If you begin to keep records you will see that certain pairs are more active and pip swings more and less violent dependent on the session trading. There are charts on the web to help you with this but my advice is to chart the four major pairs and the pair or pairs you trade for 60 days by session high and low and you will grasp value in these facts better than reading any chart.
The Aussie session, while the start of the trading day, can be considered to be a mere "opening act" as the world money is far quieter than any other time of the day. However when the Asian power begins to move in with the open of the Tokyo session get ready for more action. Be mindful that with the yen, the third most traded currency behind the EURO and the USD, power volatility and opportunity increases for the astute trader. When the Asian world begins to wrap up their trading day, the main acts are ready to take the stage.
If Sydney is an opening act, and Tokyo is Act 2, then London open is the main show for many if not most of the traders of the world. London is the Forex capital of the world. Pip ranges, liquidity, and opportunity increases dramatically. Placing trades at this time frequently can be done with smaller spreads. Beware... the pros are here ready to take the money of the novice trader. Consider what a shark must think when he is near shore with hundreds perhaps thousands of unsuspecting people swimming a few yards away. He has one thing on his mind... lunch. The professional speculators and traders are eager to separate you from your money so before trading the London session make sure to do lots of homework at Ace Gazette Traders Academy or similar location for education and support.
When New York begins and the overlapping of London occurs think the perfect storm... opportunity and risk rise dramatically and you need to be on your toes. Trend reversals, breakouts and news events again create a wide ranges that can yield great profits or cause great loss.
The most currency trades per hour occur typically during the overlap. Since a large percentage of all currency involve USD on one side of the other the swings often are really violent. Traders from the previous sessions are taking profits or losses.
So there you have it... when the FOREX world begins and ends. One last thing when you think you have it all figured out... think again Forex is a living breathing organism that is continually changing. The session times are fixed but the traders will and often do move to a session when there are unsuspected and pounce on the novices. Find the session or sessions that best fits your personality and ability. Consider the spreads and opportunity but also consider the risks. Please contact me if you have questions or suggestion for improvements for the content of this article.