As a forex trader, you normally understand that traders are buying and selling currencies every minute of weekday. This nonstop activity is actually what makes the forex market unique among other financial markets, with more than $8.2 trillion changing hands on a daily basis.
However, this 24 hour activity is made up of three trading periods in various parts of the world and each trading session at its time, beginning from Asia to Europe to North America.
Round the clock trading actually lets investors from across the globe to trader during regular business hours, after work or even in the middle of the night. Though you can trader through out the but not all times of the day have equal volatility and when there is little or no volatility, making money from the market is not that easy since price moves are vert minimal.
In this article, I will guide through the 3 Trading Sessions In Forex, so stay glued to this guide in order to have a perfect mastery of each trading session's timing.
Table of Contents
Understanding The 24-Hour Forex Market
The 24-hour forex market offers reasonable advantages for many institutional and individual traders since you can trade and potentially profit on currency movements, regardless of the time. But just because the market are always open means you must also trade through out the day.
As a trader, if you try to watch the market round the clock, this will lead to exhaustion and probably you might end up poor trading decisions.
The market can make a drastic moves at any time but this does not still means you must always be in front of your chart to catch this moves. As a successful trader, you need to focus on specific time windows instead of attempting to stay up to date with every market move.
Navigating Forex Three Trading Sessions
The Forex market can be said to operate in three key shift, even though it runs 24/7. This shifts are known as the Asian, European, and North American sessions, with their names coming from their major financial hubs: Tokyo, London and New York respectively.
These regions where not just chosen at random, since they represent the times when their respective regions experience the heaviest trading activity. These sessions are the busiest because that is when local banks, businesses and traders are most active in their respective markets.
Asian Forex Session (Tokyo)
Due to their time zone and position on the globe, the Asian markets are the first to see action when liquidity is restored to the FX market at the start of the week. Trading activity from this compartment of the world is unofficially represented by the Tokyo capital markets and it last from midnight to 9 am. GMT.
Aside from Japan, there are also remarkable countries that also trade during these hours and they include; China, Australia, New Zealand, and Russia.
Below are the general characteristics of this session
- Lower Volatility
- More Range-bound trading
- Regional Focus
- Influence of Economic Data
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European Forex Session (London)
Just before the Asian Trading hours close, the European session comes into play to maintain the currency market active. This Forex region is well sophisticated since it includes major financial markets. London takes the on the honor of defining the outlook for the European session.
Though London represents the market, the trading period can start even before the official opening in the U.K due to the presence of other capital markets, including Germany and France. European hours generally run from 8 A.M to 5 P.M. GMT.
Below are some general characteristics of this trading session:
- High Liquidity
- Major Currency Pairs
- Euro News Impact
- Market Trends
It is good you keep in mind that Trading sessions can start before and extend beyond set official trading times since it all depends on the degree of activity in the market.
North American Forex Session (New York)
It true that the Asian markets have already been closed for many hours back by the time the New York session comes into act but the day is still just half way through for the European traders.
New York session is probably the most dense session amongst all three and it accounts for about three-quarter of Forex trading worldwide. This session is dominated by activities in the United States.
Similar to other markets, the North American hours may unofficially begin before their GMT start time taking into account the early activity in financial futures, commodity trading and the concentration of economic releases.
Below are major characteristics of this trading session:
- USD-centric pairs
- High Volatility
- Economic Data Impact
Effects Of Overlapping Trading Sessions
We have the Asian/European Sessions overlap, that sometimes lead to more volatility due to increased trading activity during these hours. This shows the uptick in the hourly ranges in different currency pairs at 7 A.M GMT.
You might be surprise to see a greater response to the Asian/European session overlaps and a less dramatic increase in price action during the European/US sessions concurrence if the currency pair being traded is a cross made of currencies that are most actively traded during Asian and European hours.
Also, the presence of a scheduled high impact news for each currency still have a substantial influence on activity regardless of the pair or the session.
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Do not try to establish a position during a pair's most active hours since this might lead to a poor entry price, missed entry or a trade that simply does not follow the rules of the strategy you use.
Is Greenwich Mean Time Still The Standard Time?
In case you did not know, Greenwich Mean Time is no longer the standard for worldwide time. The Standard has been Universal Coordinate (UTC) since the year 1972. Their times are the same but GMT is a time zone while UTC is a time standard.
Can I Trade Forex On Weekends?
No! the forex market is available is open 24 hours a day during the week but it closes at about 5 P.M on Fridays and reopens at 5 P.M on Sundays.
What is The Best Time to Trade Forex?
There is no official best time to Trade forex but several experience traders think that the European and New York sessions hold the highest potentials to be a profitable trader especially during the overlapping time. During these hours, there are numerous participants and the market experiences volatility and liquidity, especially for the USD pairs.
Closing Remark On Guide to Forex Trading Sessions
As earlier said in this article, the Forex market is open 24 hours a day, for five days a week and is made up of the three main Forex trading sessions each coming at its time though there are some overlaps or trading sessions that sometimes see higher volatilities.
However, it is not because the FX market is always open that you have to monitor and take part in every session. As a forex trader too, I will advise you start trading the European/U.S session overlap since this is where the market see the highest level of volatility.