The foreign exchange market (forex) is where currencies are traded. It operates on a global scale, involving financial markets across the world. Given its decentralised nature, it is important to know that this market operates 24/7. This is because there’s always a global financial center open due to the time differences, from Sydney to New York. Therefore, in theory, currency exchanges do not have a “closing time.”
Even though the forex market runs all the time, the trading dynamics and liquidity can vary at different trading sessions. This takes us to the concept of trading sessions, which are essentially the operational hours of various global financial centers. There are four major sessions: Sydney, Tokyo, London, and New York. These sessions overlap at certain times offering high-liquidity periods.
Now, let’s talk about how Contract For Difference, or CFD, comes into play. CFD trading is a derivative product that allows traders to speculate on the price movements of financial markets, including forex, without the need to own the underlying asset.
CFD on currency pairs allows traders to trade at their preferred time, within the trading sessions. While the forex market is open round the clock, CFDs do have an opening and closing time set by the brokers. Typically, forex CFDs are available for trading from Sunday 22:00 (GMT) until Friday 22:00 (GMT), with a daily break from 22:00 (GMT) to 23:00 (GMT). However, this can slightly vary depending on the broker and their platform services.
What’s crucial to understand is the “close” of the currency exchange or the forex market does not signal the end of trading opportunities. Instead, the closing times of individual trading sessions can bring increased price volatility, essentially because it’s the time when traders are closing their positions.
Interestingly, professional traders often leverage the closing hours of these sessions to ride on the high volatility. Some traders use the approach of “close of the day trading,” where they enter the trades near the closing hours of major sessions. They aim to capitalise on the price swings and overnight gaps that might occur due to any global economic events or news.
Yet, it’s important to note that trading during these times could also carry higher risk due to high volatility. Therefore, understanding market dynamics and a sound risk management strategy becomes crucial if you’re planning to trade during these high-volatility periods. And this applies to both forex and CFD trading.
To conclude, the phrase “What time do currency exchanges close” might be a misnomer because the currency exchange (forex market) technically never closes. However, when it comes to forex CFDs, they do have a definitive opening and closing time set by the brokers. Therefore, the answer to the question will depend on the context. It is always important to check with your broker or trading platform about their specific operational hours before you begin trading.