Global currencies are traded at all times of the day in the forex market, even when the market is closed. The forex market is very competitive. The increased availability of advanced technologies and information processing has only increased the number of participants and the amount of trade.
While markets in many foreign countries are closed, North American markets are open, foreign currency trade is still taking place. While the majority of trading in a specific currency happens, its main market is open. Many other banks around the world hold foreign currencies that allow them to trade when the main market is closed. North American markets, for example, are open when Japanese markets are closed. North American traders are still able to buy and sell Japanese yen through their brokerages and banks. However, the Japanese yen market is more active at a time when the Japanese market is open.
Trade disadvantages: When the currency market is closed
Some investors would not consider trading while the currency market is closed. In near proximity to the market, a number of trading positions are being closed, which can generate instability in the currency markets and trigger volatile fluctuations in prices. The same may be the case when markets open up. At this time, traders might be opening positions because they don’t want to keep them over the weekend. Holding trades over a weekend is not recommended. Unless your approach as a forex trader is to pursue a long-term strategy that involves holding trades for weeks or months.
Trading on the weekend
The U.S. forex market closes at 5 p.m. EST on Friday and opens at 5 p.m. EST on Sunday. While the market is confined to retail traders, forex trading takes place over the weekend through central banks and other organisations. There is also always a price gap between the close of Friday and the beginning of Sunday. This disparity is considered to be a distance.
Traders who do not wish to expose their position to the risk of a breach will close their position on Friday night or place stops and limits to mitigate the risk.
In some countries where there is market uncertainty, a bank could go bust in the span of a weekend. This may mean that your place will shift drastically when the market re-opens on Sunday.
Common Currencies for Trade
Many currencies have very low demand rates for exchange purposes. As a result, these currencies can be difficult to exchange and can typically only be exchanged with particular banks. Since currency trading does not take place on a regulated market, there is no guarantee that there will be anyone who will comply with your trade requirements. However, the big currencies in the world, such as the US dollar, the euro and the Japanese yen, are the most commonly available.