Every week we provide insights into popular assets and hot questions, so you can easily learn more about the investment market in bite-sized pieces.
In this Markets in Focus we take a closer look at Forex.
The foreign exchange (Forex) market is one of the most dynamic financial markets in the world. In this edition of Markets in Focus, we take a closer look at what makes forex trading so appealing and how traders can take advantage of its continuous opportunities.
Why Do Traders Love Forex?
Forex trading is popular among investors due to its 24-hour availability and the ability to trade with CFDs (Contracts for Difference). Unlike stock markets, which have fixed trading hours, forex operates non-stop, providing traders with numerous opportunities to capitalize on price movements.
Why Is the Forex Market Open 24/5?
Unlike traditional stock exchanges, the forex market does not have a central exchange where all transactions occur. Instead, forex trading happens over-the-counter (OTC), mainly between major global banks. Since these banks are spread across different continents, trading takes place across multiple time zones, ensuring continuous activity.
For example, trading begins in Australia on Sunday at 11:00 PM (local time). Two hours later, Tokyo opens, increasing forex trading volumes, particularly in the Japanese Yen (JPY), Australian Dollar (AUD), and New Zealand Dollar (NZD). However, because all currencies are interconnected, major pairs like EUR/USD and USD/JPY also experience active trading.
At 10:00 AM (local time), when the Tokyo session ends, the London market has already been open for an hour. This overlap creates a seamless transition between sessions, ensuring uninterrupted forex trading. Later, as New York opens in the afternoon, market activity surges again, keeping forex liquidity high throughout the day.
When Are Forex Turnovers the Highest?
The highest trading volumes occur during the overlap of major financial centers. Specifically:
- The most active period is during the European afternoon, when both London and New York are open.
- Trading slows in the evening as European markets wind down.
- Wall Street remains active until 11:00 PM, just as Australia begins a new trading day.
- This cycle repeats continuously until Friday at 10:00 PM, when forex traders close their positions for the weekend.
How to Benefit from Forex Trading
Leverage allows traders to amplify their positions, increasing both potential profits and risks. For example:
- Suppose you buy 1,000 EUR/USD at 1.09 with 30x leverage.
- This means you are long on EUR (the margin currency) and short on USD (the profit currency).
- If the EUR/USD exchange rate rises to 1.11, closing your position would result in a $20 profit.
- With 30x leverage, your total profit would be $600.
- However, if the EUR weakens instead, losses could also be amplified.
Trade Forex 24/5 with Change
At Change, you can trade forex 24 hours a day with leverage up to 30x. Go to the app now and explore a wide range of forex pairs, seizing opportunities around the clock.
We wish you a successful trading week on the Change App.
Until next week!
