The foreign exchange (forex) market is where banks and individuals buy, sell, or exchange currencies. It’s the largest financial market in the world, according to the latest reliable data from 2022, when global daily trading was $7.5 trillion. It is a global decentralized platform where currencies are traded. Unlike traditional stock markets, which operate on specific exchanges, forex trading occurs over-the-counter (OTC), meaning it doesn’t have a centralized physical location. Banks, financial institutions, corporations, and individual traders participate in forex trading through electronic networks, making it accessible worldwide and highly liquid.
The forex market is structured around currency pairs. When trading, participants buy one currency while selling another simultaneously. The goal is to profit from the fluctuations in the exchange rates between two currencies. Some of the popular currency pairs includes; EUR/USD (Euro against US Dollar), USD/JPY (US Dollar against Japanese Yen, GBP/USD (British Pound against US Dollar) etc.
All trading takes place in the forex market, without a forex market there is no forex trading. It’s like a physical market, if there’s no market there is no place to showcase your products or buy products.
In other words, forex market is where buying and selling of currencies happen.
Market Participants
There are main players in forex and they include large banks, central banks, investment firms, corporations, and individual traders. Central banks and governments influence currency values through monetary policy and economic reports, while individual traders participate for profit.
When Does the Forex Market Open in Nigeria ?
This is a frequently asked question, the forex market operates 24 hours a day, five days a week. This around-the-clock schedule is due to the global network of financial centers that allow continuous trading across time zones. Anyone no matter the time zone has 100% access to trade. The market opens on Sunday at 11:00 PM GMT+1and closes on Friday at 11:00 PM GMT+1.
Most traders can’t monitor the market constantly, so they’re likely to miss out on opportunities or, even worse, face unexpected losses. A sudden spike in volatility can cause the market to move against a trader’s open position when they’re not actively watching.
To manage this, traders need to understand when the market is likely to be most volatile and plan accordingly. By recognizing key periods of volatility and adjusting their trading approach to fit each session, traders can create a more effective strategy to manage risk and seize opportunities.
It is important to note that the 24 hours in the trading world is different from that of the real world.
The forex market is divided into different trading sessions, the three major ones are:
The Tokyo session overlaps with the Sydney session for a few hours, leading to increased market activity. Japan is a major financial hub, and the Tokyo session sees significant trading of the yen, along with other Asian currencies. This session opens at 11:00 PM GMT+1 and closes at 4:00 AM GMT+1. During this session, the Japanese yen and other Asian currencies are actively traded.
Best Currencies to Trade During this Session;
1. USD/JPY (US Dollar/Japanese Yen): This pair commonly sees pips ranging from 30-60.
2. EUR/JPY (Euro/Japanese Yen): This pair common ly sees pips ranging from 40-80.
3. AUD/JPY (Australian Dollar/Japanese Yen): This pair commonly sees pips ranging from 40-70.
So therefore, the Tokyo session for people in Nigeria opens by 1 AM and closes by 10 AM.
If you are interested in trading Yen, the Tokyo session offers the best opportunities due to the high activity going on there during this time
When the Tokyo session closes, the London session begins. As the world’s largest forex trading center, London brings high volatility and liquidity to the market. Major currency pairs like EUR/USD, GBP/USD, and USD/JPY experience substantial movement during this session. It opens at 8:00 AM GMT+1 and closes at 5:00 PM GMT+1. The London session is significant due to its high trading volume, as many major banks are headquartered in London.
Best Currencies to Trade During this Session;
1. EUR/USD (Euro/US Dollar) – This pair commonly sees pips ranging from 50-90.
2. GBP/USD (British Pound/US Dollar) – This pair commonly sees pips ranging from 60-100 pips. It is Known for its volatility.
3. USD/CHF (US Dollar/Swiss Franc) – This pair commonly sees pips ranging from 40-80 pips. It is said to be a safe-haven pair.
So therefore, the London session for people in Nigeria opens by 8 AM and closes by 5 PM.
This session is best for experienced traders who want larger price movements and higher volatility. It is often said to be the best for trading due to the sheer volume of transactions and the overlap with the New York session. Spreads are generally thin during this session, making it ideal for day traders.
The New York session starts midway through the London session, creating a substantial overlap that results in some of the Forex market’s most volatile periods. This overlap brings high liquidity, particularly in the first few hours, when both sessions are active. It opens at 2:00 PM GMT+1 and closes at 11:00 PM GMT+1. This session is crucial because it overlaps with the London session, resulting in high liquidity and trading volume, especially in USD pairs.
Best Currencies to Trade During this Session;
1. USD/CAD (US Dollar/Canadian Dollar) – Due to the fact that US and Canada are close to each other, this pair commonly sees pips ranging 40-70.
2. EUR/USD (Euro/US Dollar) – The overlap with the London session can expand the daily range to between 60 and 100 pips.
3. GBP/USD (British Pound/US Dollar) – It also benefits from the overlap, frequently experiencing daily movements of 70 to 110 pips.
The New York session is ideal for traders who excel in a fast-paced environment, offering substantial price movements and plenty of trading opportunities. The early overlap with the London session is especially volatile, making it a prime period for day traders.
Best Time to Trade Forex in Nigeria
The peak times for trading Forex in Nigeria are during the overlaps:
1. London and Tokyo Overlap (9 AM – 10 AM WAT): This short overlap can offer liquidity, especially if there are impactful economic releases.
2. London and New York Overlap (2 PM – 5 PM WAT): This is the most active time, with high liquidity and volatility, as traders from the two largest financial markets are active.
These times offer more trading opportunities and potential for profit due to the increased market activity.
Conclusion
The Forex market offers unique opportunities for traders and investors to profit from global currency movements. However, it requires understanding market mechanics, the factors that influence price movements, and effective risk management. With the right approach and tools, forex trading can be a valuable investment portfolio, but it is important to approach with knowledge, discipline, and careful planning to succeed.
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