The forex trading day: Sydney, Tokyo, London and New York

What you will learn

• The approximate times of the Sydney, Tokyo, London and New York sessions in German time, in winter and in summer.
• Why the London–New York overlap is usually the most liquid part of the day, and what happens at the daily rollover.
• What benchmark "fixes" are and why prices can move around them.
• How daylight-saving time changes shift the sessions for a few weeks each year.

Explanation

The spot forex market is an OTC market (over the counter): there is no central exchange, and banks trade with each other around the world. Trading runs from Sunday evening to Friday evening German time. Because there is no opening bell, the "sessions" are conventions based on business hours in the main financial centres. Different sources use slightly different times.

Approximate session times in German time

The table assumes local business hours of about 08:00–17:00 (Tokyo 09:00–18:00). CET is Central European Time (UTC+1, winter); CEST is Central European Summer Time (UTC+2). UTC is Coordinated Universal Time.

Sydney's times move in the opposite direction because Australia uses summer time during the European winter. Japan does not use daylight-saving time.

Overlaps and quiet times

• London–New York overlap (about 14:00–18:00 German time): two of the largest centres are open at once. Spreads in majors are usually tight and many US data releases fall in this window.
• Tokyo–London overlap (around 09:00–10:00 German time in winter): a short window that often sets the tone for the European morning.
• Late New York to early Sydney (about 22:00–01:00 German time): the thinnest part of the day.

The daily rollover

The forex "day" ends at 17:00 New York time, normally 23:00 German time. At this moment brokers book overnight financing (lesson 4) and liquidity providers refresh their prices. Spreads often widen sharply for a few minutes. Avoid placing market orders or tight stop-loss orders around this time.

Benchmark fixes

A fix is a reference rate calculated at a set time, used by funds and companies to value or execute large orders. The best known is the WM/Reuters 4 pm London fix (17:00 German time). In Japan, banks set reference rates for customers at 9:55 Tokyo time. The European Central Bank (ECB) publishes euro reference rates around 16:00 CET, but these are for information only. Large flows into a fix can cause short, sharp moves that then reverse.

The daylight-saving trap

The USA switches clocks on the second Sunday of March and the first Sunday of November; the EU and UK switch on the last Sunday of March and the last Sunday of October. For about two to three weeks in March and one week around the end of October, New York opens one hour earlier in German time (13:00 instead of 14:00), US data appear at 13:30 instead of 14:30, and the rollover moves to 22:00.

Worked example

Hypothetical example: a trader in Berlin works 08:00–16:30 and can trade from 17:00 to 21:00. Assumptions: EUR/USD spread 0.0001 (1 pip) during the overlap, 0.0005 (5 pips) at the rollover; position 100,000 EUR. Commissions and swaps are excluded.

1. Available window 17:00–21:00 German time: the London–New York overlap ends around 18:00, so the trader catches one hour of overlap and then the New York afternoon.
2. US data at 14:30 happen while the trader is at work, so the trader should not hold tight orders across them without a plan.
3. Cost of entering at the rollover instead of the overlap: extra spread = 0.0005 − 0.0001 = 0.0004; 0.0004 × 100,000 = $40 extra per trade.
4. In mid-March, New York opens at 13:00 German time and US data appear at 13:30; the trader must update alarms for these weeks.

Common mistake

Practice activity

On paper: (1) In German summer time, when is Tokyo open? (2) A US report is released at 08:30 New York time. At what German time does it appear in normal weeks, and in a week in March when only the USA has moved to summer time? (3) What is the extra spread cost of 50,000 EUR on EUR/USD if the spread is 0.0004 instead of 0.0001?

Key takeaways

• Sessions are conventions for business hours in Sydney, Tokyo, London and New York, not official opening times.
• The London–New York overlap (about 14:00–18:00 German time) is usually the most liquid window.
• Around the rollover (normally 23:00 German time) spreads often widen; avoid market orders and tight stops then.
• Different US and EU clock-change dates shift New York by one hour for a few weeks each year.

Next step

In the next lesson you will learn how cross rates are calculated from two dollar pairs and what triangular relationships tell you about a cross.