Forex trading is the activity of exchanging currencies in the exchange rate. So, how does a trader gain from such activity? Simple. Through fluctuations of the exchange rate, there are times that traders can buy low, sell high to get profit.
The concept is simple but to execute them is very difficult. It requires proper timing, strategy and discipline. Speaking of proper timing, do you know that foreign currency exchange market is open 24 hours on weekdays?
Yes, timing is everything in forex trading. Even though the market is open 24 hours from Monday to Friday, the best time to trade is almost always when the market is the most active.
Here we will explain about forex trading hours, FBS platform, and the tips you can use to gain an upper hand.
Forex Trading Hours
Forex market is open 24 hours on weekdays regardless of public holidays. Why? Because there are four cities that operate as financial hubs in foreign exchange; London, New York, Tokyo and Sydney. As one market opens, another closes and it goes on continuously until the weekends.
For Malaysian, we can safely assume that the market starts to open at 6 am Monday and closes at 5 am Saturday Malaysian time.
No Central Exchange In Forex
Actually, there are no central exchanges in the forex market that will undergo all the foreign currency transactions. The markets are dependent on supply and demand. In theory, anyone can trade currencies any time of the day.
But, to buy a currency pair, for example MYR from USD, you would need a seller. So, if you are an American trying to buy MYR when it is nighttime in Malaysia, it would give you a hard time finding a seller. These sellers would also have more leverage since there are no other sellers during that time. In return, you might get a more expensive MYR.
So, that’s why there are strategic times to buy and sell foreign currencies.
What is the best time to trade forex?
“The best time to trade is when the market is most active”
Why?
As mentioned above, you need a counterparty to either buy or sell currencies. When there are more buyers and sellers in the market, the condition is called “high liquidity”. This means that the currencies that you want to buy and sell are more readily available. Therefore, the price is efficient in a way that it will move based on current market force of supply and demand.
If there are more people selling, then the price will drop and if there are more people buying, then the price will rise. At least in theory.
So, when is the market most active?
Depending on the currency pair. If you want to trade AUD/JPY you should trade when the Sydney market and Japanese market overlaps. In Malaysia time, that would be from 7 am until 1 pm.
Below are the guidelines on when the currency market opens in four financial hubs:
| Financial Centre | Trading Hours (Malaysia GMT +8) |
| London | 3 pm to 12 am |
| New York | 8 pm to 5 am |
| Sydney | 5 am to 2 pm |
| Tokyo | 7 am to 4 pm |
For Malaysian, when is the best time to trade forex?
Most of the Malaysian traders are passive traders. Majority would be trading as a part-time or as side income.
Therefore, if you are looking for the most convenient time to trade forex, in my opinion, that would be 8 pm to 11 pm. This is when the London and New York market overlaps. The 3 hours window will see the popular pairs such as USD/GBP, USD/EUR and USD/CAD to be in the highest daily volume.
If you’re more of a daylight person and can take some time off during the day, the best time would be from 2 pm to 3 pm. This is when London markets and Tokyo markets overlap. Best currency pairs to trade would be GBP/JPY and EUR/JPY. Unfortunately, the overlap only runs for an hour and usually the volume traded for these currency pairs is less compared to pairs involving US dollars.
So, what are the risk factors, besides timing, that are involved in trading forex?
Of course. The point of trading forex is buying low, selling high. You want to be in a certain trade at the right time and if you are not aware of the best time to trade forex, you will be missing out. Besides that, here are other risk factors involved in trading forex:
1. Volatility
Forex market can be really unpredictable and move in a split second. However, this volatility is what attracts many traders to join the forex market. There are also multiple factors that can affect the movement of markets such as traders’s sentiment, market conditions and geopolitics.
2. Leverage
Forex trading uses leverage since most of it is done using contract-for-differences (CFD). Therefore, you can amplify your gains but on the other hand, it can also amplify your loss. If you are not disciplined, one single bad trade can wipe out all your deposits.
3. Interest incurred
Forex trading using CFD will incur interest on every trade that you execute. If you carry your trades overnight, you will incur interest and this can wipe out your gains if you are not aware. Always monitor your position and read between the fine lines on every trade.
Forex Trading Hours In FBS Brokerage Platform
Brokerage platforms show the trading hours differently based on your setting. For example, if you use FBS, your default time would be Eastern European Time (EET). According to this setting, European session would begin at 9am and Pacific Session would begin at 11 pm as shown on the default setting. Visit FBS to know more.
Daylight Savings Adjustment
You can adjust the timing to your liking and preferred time zone. However, be aware of the daylight saving adjustments that will affect the timing for your trade. There are two times in a year where daylight savings occur which is:
- Last Sunday of March at 01:00 GMT
- Last Sunday of October at 01:00 GMT
Timing, Discipline and Strategy
Three key points in executing a good trade is:
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Timing
Professional traders know when is the right time to stay still and when is the right time to execute trade. Knowledge such as most active trading hours could be proved to be vital in making decisions. You don’t want to be entering a position an hour too late and left with loss instead of gains.
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Discipline
This is easier said than done. Majority of traders lose money when trading simply because they don’t follow the take profit and stop loss that they set themselves. Trading is more on psychology compared to financial and to gain an upper hand, you have to be very disciplined and stick to the original plan that you set out to be.
-
Strategy
Generals should not go to war without a plan. The same goes to traders too. Before executing any trade, plan the best and worst case scenario in your mind and act accordingly. The market is unpredictable and can go wrong in a split second. Always be prepared for the worst. Bear in mind that hope is not a strategy.
Key Takeaways
- There are four major cities that operate forex exchanges; New York, London, Tokyo, Sydney. As one opens, another closes, making the foreign markets run continuously 24 hours during weekdays.
- There is no central authority that governs all the buy and sell in foreign currencies.
- The best time to trade in the forex market is when the market is most active. To know when the market is most active, you have to look at trading hours and identify when the markets would overlap.
- For Malaysians, the best time to trade would be 8 pm to 11 pm and 2 pm to 3 pm.
- There are other risk factors that affect traders besides market timing such as volatility, interest and leverage.
- Be aware of the daylight adjustment time.
- Discipline, timing and strategy are what makes an excellent trader
When do you think is the best time to trade the forex market in Malaysia? Let us know your opinions and sign up on our platform to get updated with more content like this!