With the exception of weekends and holidays, the foreign exchange marketplace, or forex, is open around the clock. Since most currency exchange occurs on ECN platforms, forex is technically regarded as an over-the-counter market. Institutional banks and exchanges, on the other hand, are actively involved in dealing as a source of liquidity and as a middleman that guarantees the execution of contracts between all counterparties. Even though dealing occurs continuously, it is split up into so-called dealing sessions, which affect the volumes, volatility, and liquidity of specific currency pairs. The strategies used are therefore influenced by the dealing sessions.
Selling sessions divide the 24-hour activity of the foreign exchange marketplace. When exchanges and banks in one area trade currencies, this is referred to as a dealing session.
When their working day is through Forex market hours, banks and exchanges in other areas start their working day. dealing happens round-the-clock since the sessions overlap.
The volume of dealing is based on the dealing session. It makes sense that the most dealing activity occurs during the London (European) session because the United Kingdom leads the world in terms of both the quantity and number of trades. Liquidity is determined by huge volumes and a large number of dealers; if there are many players in the marketplace, trade counterparties will be located fast, which means that the spread is tightest at periods of high liquidity.
However, each side will make an effort to gain from the trend at these times.
From 8:00 to 16:00 GMT, the London trade session takes place. It partially overlaps with the American session, and this time frame is regarded as the busiest for dealing. The market experiences the highest trade volumes, combined with the highest liquidity and volatility, between 13:00 and 16:00 GMT. However, a marketplace with considerable volatility is challenging to forecast. As a result, the period before the overlap is preferred for new dealers.
The quieter time between the start of the London session and the start of the American session is still preferred by the majority of dealers, according to statistics. Trend and swing dealing methods perform well at this time, as demonstrated by dealing algorithms that leverage corrections to open trades at the best price.
The Forex market’s volume and liquidity are determined by the dealing sessions and marketplace hours. Depending on the aforementioned factors, there may be a floating spread, gapping, a trend, unpredictable volatility, or none of the above.