Forex Trading System- Global Banking Hours

Despite all the fundamental and technical influences on the foreign exchange mar-
ket, one major constant in determining periods of high volatility is the hours of opera-
tion for the central banks of each major currency country.
Figure D.1 emphasizes the importance of the effect of time of day on forex mar-
ket activity and volatility based on hours of operation around the globe. Because
banking hours vary from country to country, we have arbitrarily set hours of opera-
tion from 9:00 A.M.to 5:00 P.M.for consistency. The top row is expressed as central
european time (Greenwich mean time + 1 hour), which aligns with the Central Bank
of Europe in Frankfurt, the most prestigious central bank in the European Monetary
Union.
The table allows traders to view overlapping time periods when central banks
for different currencies are operating and thus guarantee a certain degree of mutual
activity.
For example, when banks open in New York City at 9:00 A.M.EST, the Frankfurt
bank has already been operating for six hours. So there is a two-hour overlap of trading
in the EURUSD currency pair on both sides of the Atlantic Ocean (9:00 A.M. to 11:00 A.M.
EST). This can be readily recognized in the time of day activity chart for the EURUSD
pair (Figure 2.4 in Chapter 2).

Dedicated currency traders may have to adjust their sleeping schedules to take
advantage of increased activity and volatility when trading non-USD cross-rate cur-
rency pairs.