Every financial market in the world have a closing time everyday except the foreign exchange market. It is the key factor to make forex trading superior to all.
Even though there are several advantage it also have some disadvantages which make trouble to some of the forex traders.
In this article i will explain you the advantages and disadvantages of forex trading hours which have 24 hours a day trading facility.
Well as i said you that forex market is 24 hours open you may ask me why does it closes on Friday and reopens on Monday. It is actually a great question because many traders have the same doubt. the answer is really simple. The forex market never close on Friday. What! Yes only the ability to trade by retail traders in not available during weekends. Retail traders includes you and me who trade with their personal account don't have access for forex market,but as usual it is open for the need if central banks and financial institution to conduct business.
It is the main reason why you see gaps in the exchange rate when the market opens on Monday. I will explain you about gaps in later lessons but as of now have in mind that forex market never close.
You must have heard a little about forex trading session. Lets go deep about it now
Daily trading sessions
You can always have one active trading session through out the day. You can even find two session overlap at some point of time.
To explain you in simple words, Whenever there is sun shining Forex Market is open. To make it much more clear i have attached a image which describes the trading hours of a day with four trading sessions including New York, London, Sydney and Tokyo.
London session open from 8:00 GMT to 16:00 GMT
New York session open from 13:00 GMT to 21 GMT
Sydney session open frm 22 GMT to 6 GMT
Tokyo session open from 00 GMT to 08:00 GMT
Best time to trade
Since we have four session in forex market it will be confusing for newbie forex traders to choose the trading session which should they actually trade. One should choose trading session based their geological location and daily lifestyle. If you are located in a place where US and London overlap during 1 am in the morning it wont be comfortable for you to give your best at an odd time.
But those who are trading using price action method in higher timeframes they don't need to worry about sessions. It doesnt matter to them. because if they spot a trade setup in the chart they can simple place pending order which will be filled when the price come there.
Advantages and Disadvantages of Forex Market
Each and every field in the world have some advantage and disadvantage. So does the forex market. It have some disadvantages which makes newbie to struggle in the beginning, but believe it is the one which makes forex market the best profession to choose. I will list of some of the advantages and disadvantages below.
Advantages
- 24 hours market
- huge liquidity compared to stocks
- No upper limits for profits
Disadvantages
- Even though 24 hour market is considered as an advantage it is also consider to be disadvantage as it may lead to over trading
- Huge leverage option which may lead to greed
Traders should never worry about the disadvantage because it is easy to recover from the problem if they follow good money management, risk reward ratio, discipline etc.