Being the 20th largest economy worldwide in terms of nominal GDP ($639.6 billion) in 2016 and the largest one in the Arab world, Saudi Arabia is also the world’s largest exporter of petroleum. The oil sector comprises 92.5% of the country’s budget revenue, 97% of export revenue as well as 55% of its GDP. As of late, the kingdom has been focused on economic diversification in an attempt to diminish its reliance on oil revenue.
Yet, despite the highest concentration of high net worth in the Middle East, only a small contingent of Saudi investors have considered Forex trading as an investment product. It has been in early 2000s, when Forex was first introduced in Saudi Arabia due to efforts by Jordanian introducing brokers. All in all, unlike its neighbors Jordan and UAE, global investment initiatives such as CFDs and Forex have not been explored that rapidly in Saudi Arabia. However, following the introduction of Islamic trading accounts by some leading brokerages, the popularity of Forex as a leveraged product has continuously been on the rise among Saudi Arabia traders.
Without a doubt, the most distinguishable feature of the Foreign Exchange Market is that it remains active 24 hours per day, 5 days per week, with each trading day being comprised of four main segments or trading sessions. These segments do not last for 6 hours each, or in other words, they overlap each other. Once one financial center becomes inactive for the night, trading activity continues because another center somewhere else on the globe opens. If we look into a single trading day, we should note that the Forex market opens in New Zealand at first, then in Australia, in Asia (more precisely Japan), the Middle East, Europe (more precisely London) and finally in North America (more precisely New York).
Unlike most countries worldwide, there is no clock adjustment in Saudi Arabia for the winter period. Therefore, no changes are observed in the hours of activity for the four main trading sessions. Local time in Saudi Arabia – Riyadh, observes Arabia Standard Time throughout the entire calendar year. Riyadh time equals Coordinated Universal Time (UTC/GMT) plus 3 hours.
In Saudi Arabia, Forex trading hours can be presented in the following manner:
- The first segment (London/European trading session) starts at 10:00 AM Riyadh time (7:00 GMT) and closes at 7:00 PM Riyadh time (16:00 GMT). London and Tokyo sessions overlap between 10:00 AM and 11:00 AM Riyadh time (7:00-8:00 GMT). Due to London’s status as a leading financial center, market liquidity is considerably high during the European trading hours, which makes almost any currency pair suitable for trading.
- Liquidity coupled with overlaps with Tokyo and New York is the reason why the larger part of daily transactions is concentrated during European trading hours. At the same time, the huge number of transactions and market participants boosts volatility, which is seen as a key prerequisite for traders to focus their operations namely during the London session.
- Last but not least, it is during the European trading hours when large strings of macroeconomic reports, central bank monetary policy decisions, as well as speeches by key bank officials and politicians, usually take place. As a result, a number of major and minor currency pairs (EUR/USD, GBP/USD, USD/CHF, EUR/GBP, EUR/CHF, GBP/CHF etc) are usually affected, while traders tend to focus their attention on them due to their lower spreads;
- The second segment (New York/US trading session) starts at 3:00 PM Riyadh time (12:00 GMT) and closes at 12:00 PM Riyadh time (21:00 GMT). The US and the European sessions overlap between 3:00 PM and 7:00 PM Riyadh time (12:00-16:00 GMT). The US session accounts for approximately 19% of overall trading volume and, along with the United States, it encompasses activity in Canada, Mexico and a few markets in South America. During the US trading hours all currency pairs featuring the US Dollar tend to be a suitable trading option;
- The third segment (Sydney trading session) starts at 1:00 AM Riyadh time (22:00 GMT) and closes at 10:00 AM Riyadh time (7:00 GMT);
- The fourth segment (Tokyo/Asian trading session) starts at 2:00 AM Riyadh time (23:00 GMT) and closes at 11:00 AM Riyadh time (8:00 GMT). Sydney and Tokyo sessions overlap between 2:00 AM and 10:00 AM Riyadh time (23:00-7:00 GMT). Besides Tokyo, markets in Singapore, Malaysia, Hong Kong, China and Russia are also open for business during the Asian trading hours.
What is specific about this session is its lower liquidity compared to London and New York. As a result, the market usually consolidates, which is a good starting point for some traders to prepare their positions for the breakouts that occur when the London session begins.
Logically, Asia-Pacific currencies tend to demonstrate higher activity during the Asian trading hours, as corporations and individuals from any specific country in that part of the world will use their local currency in most of their Forex transactions.