The stock market is open only during normal business hours in Malaysia. However, in contrast, the forex market is open 24 hours a day on all weekdays. This is because the forex market is completely international in nature. Hence, it needs to cater to people from all timezones.
When new forex traders first start trading, they try to be active at all hours. Trading from 5 AM in the morning to midnight. However, this is an unfruitful strategy in the long run. Most traders who attempt this burn out quickly and their returns are also relatively low.
Rather than trading for 16 hours a day, it is better for traders to choose a shorter fixed time slot during which they will conduct their trading activity.
Here is a short guide for Malaysian traders to help you choose your forex trading hours.
As already mentioned, the forex market is open at all times during weekdays and is closed during weekends. For Malaysian traders, this means that the forex market opens at 5 AM on Monday and closes at 4 AM on Saturday (in Malaysian time).
The reason why the forex market is open throughout the day is because the market needs to be open to cater to different exchanges throughout the world.
Even though the forex market is open 24 hours a day, it is unwise to carry out trading activity throughout the day. The reasons for this are explained in the next sections.
The entire forex market can be divided into four major exchanges. These are the New York exchange, the London Exchange, the Tokyo exchange, and the Sydney exchange.
Each of these exchanges is open at different hours during the day. Timings given below are in MYT.
New York exchange timing – 8 PM to 5 AM.
London exchange timing – 3 PM to 12 AM.
Tokyo exchange timing – 7 AM to 4 PM
Sydney exchange timing – 5 AM to 2 PM
These are the most important trading hours from a forex trader’s perspective. Every forex trader should know these hours by heart and carry out his trades accordingly.
Even though these exchanges function independently of each other, they all trade the same currencies. A price fluctuation in one exchange means a concurrent price fluctuation for all exchanges. The bid and ask prices in one exchange instantly impacts the bid and ask price in all other exchanges. Hence, it is important to know that the four exchanges work in tandem with each other.
At times when two exchanges are open together, it means the overall trading volume in the market increases. This is because traders from two different exchanges are both actively trading in the forex market.
Hence, the most important forex trading hours are when two different exchanges are active together. There are three such time pairs that the forex trader should look out for.
8 PM to Midnight – Both New York and London exchanges are open.
7 AM to 2 PM – Both Tokyo and Sydney exchanges are open.
3 PM to 4 PM – Both Tokyo and London exchanges are open.
These are the timings when the forex markets are most active and volatile. Traders should remember that the timing of the New York exchange is especially important. This is because the US dollar is a part of 90% of the trades that take place in the forex market. The movements of the USD impact all other currencies and is the single-most important currency in the world.
There are two primary reasons why forex traders from Malaysia should trade during certain hours rather than throughout the day.
There are certain hours during the day when the trading volume in the forex market is much higher compared to others. These hours usually occur when two different exchanges are open at the same time. For example, the trading volume is highest when the New York exchange and the London exchange are both open at the same time.
Trading during these hours can lead to higher profitability for a forex trader. The slowest market of all the major exchanges is the Sydney exchange. However, trading volume can be high when the Sydney exchange first opens because of the long gap caused by the weekend when all exchanges are closed.
Higher trading volumes also means that the liquidity in the forex market is higher. Higher liquidity means that brokers can offer tighter spreads to their traders. A tighter spread means that a forex trader can enter and exit traders with lower fees being paid to brokers.
Since the goal of every trader is to maximize his profits per made, it makes sense to trade during hours when the spread is tighter. The spread offered by brokers is the tightest when both the New York and London exchanges overlap.
Remember that this is a general rule of thumb. Actual trading volume can also be significantly impacted by the breaking news of the day. If important news is announced, trading volumes can be significantly higher in the aftermath.
Overall, the best time for Malaysian traders to be active in the forex market is when the trading volume is highest and the spreads are the tightest. This happens when both the New York exchange and the London exchange are open (between 8 PM to midnight).
However, not every Malaysian trader can be active at midnight. Hence, traders may also consider the second-best time which is when the Tokyo exchange and Sydney exchange are both active (7 AM to 2 PM).
Trading forex at times of high volatility can be riskier than when trading during other times. During highly volatile times, the price movements can be very quick. Since currency pairs are leverage products (and the leverage can go up to as high as 1:1000), this means that a trader can lose his entire investment in a single trade.
Hence, forex traders who are just starting out, should be careful of the time during which they trade. Rather than jumping in headfirst, traders would be well-advised to study the markets and practice their trading through demo accounts which many brokers offer.
A forex trader should choose their own hours in which they are comfortable to trade. The timings provided above should be taken as general advice rather than a law that can’t be broken. We wish you all the best.