Sessions and liquidity
Lesson 23 of 31 in the course “Forex”. Free, with animations and a quiz.
Open around the clock, but not evenly busy
Forex, the currency exchange market, runs 24 hours a day, 5 days a week: roughly from Sunday evening to Friday evening. Trading moves in turns between three regions, and those are the sessions: Asia, London, New York. Asia is usually calmer. London and New York are the busiest because the biggest banks work there, and most of the trading volume goes through them.
The overlap: rush hour
Times in the picture are in UTC, the world reference time that time zones are counted from (UTC+3 means 3 hours ahead). Summer guide: Asia 00:00–09:00, London 07:00–16:00, New York 12:00–21:00 UTC. In winter London and New York are an hour later. When both are open, about 12:00–16:00 UTC in summer, liquidity peaks. Liquidity means how many buy and sell orders are available right now.
Spread and time of day
The spread is the gap between the buy price (ask) and the sell price (bid). In the picture: 1.1246 − 1.1244 = 0.0002, which is 2 pips (a pip on EUR/USD is 0.0001). You buy at the ask but can only close at the bid, so right after entry you are slightly in the red. In quiet hours there are few orders, and the spread widens. Same at big news: large players pull their orders and wait.
When entering costs the most
Example: in the daytime the spread on a pair is 2 pips, at night it is 6. Just to break even, price now has to move 6 pips, not 2. The trap: around midnight broker time, when a new trading day starts, the spread often jumps. Same at big news. Bottom line: trade when the market is lively and check the current spread before every trade.
Check yourself
- When is forex volume usually highest?
Correct answer: When London and New York are open together. The two busiest sessions run at the same time: the most orders, usually the tightest spreads. Night and the Asian session are calmer. - What usually happens to the spread in quiet hours?
Correct answer: It widens, so entering costs more. Few orders means low liquidity, so the gap between bid and ask grows. Entering and exiting cost more. - Which session is usually the calmest?
Correct answer: Asian. During the Asian session the big European and US banks are still closed, so price usually moves in a narrower range.