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Now that you know what forex is, why you should trade it, it’s about time you learned when you can trade.
It’s time to learn about the different forex trading sessions.
Yes, it is true that the forex market is open 24 hours a day, but that doesn’t mean it’s always active the whole day.
You can make money trading when the market moves up, and you can even make money when the market moves down.
BUT you will have a very difficult time trying to make money when the market doesn’t move at all.
And believe us, there will be times when the market is as still as the victims of Medusa. This lesson will help determine when the best times of the day are to trade.
Forex Market Hours
Before looking at the best times to trade, we must look at what a 24-hour day in the forex world looks like.
The forex market can be broken up into four major trading sessions: the Sydney session, the Tokyo session, the London session, and Pipcrawler’s favorite time to trade, the New York session. Below are tables of the open and close times for each session:
Summer (approx. April – October)
| Time Zone | EDT | GMT |
|---|---|---|
| Sydney Open
Sydney Close
| 6:00 PM
3:00 AM
| 10:00 PM
7:00 AM
|
| Tokyo Open
Tokyo Close
| 7:00 PM
4:00 AM
| 11:00 PM
8:00 AM
|
| London Open
London Close
| 3:00 AM
12:00 PM
| 7:00 AM
4:00 PM
|
| New York Open
New York Close
| 8:00 AM
5:00 PM
| 12:00 PM
9:00 PM
|
Winter (approx. October – April)
| Time Zone | EST | GMT |
|---|---|---|
| Sydney Open
Sydney Close
| 4:00 PM
1:00 AM
| 9:00 PM
6:00 AM
|
| Tokyo Open
Tokyo Close
| 6:00 PM
3:00 AM
| 11:00 PM
8:00 AM
|
| London Open
London Close
| 3:00 AM
12:00 PM
| 8:00 AM
5:00 PM
|
| New York Open
New York Close
| 8:00 AM
5:00 PM
| 1:00 PM
10:00 PM
|
Actual open and close times are based on local business hours. This varies during the months of October and April as some countries shift to/from daylight savings time (DST). The day within each month that a country may shift to/from DST also varies.
You can see that in between each forex trading session, there is a period of time where two sessions are open at the same time. During the summer, from 3:00-4:00 am EDT, the Tokyo session and London session overlap, and during both summer and winter from 8:00 am-12:00 pm ET, the London session and the New York session session overlap.
Naturally, these are the busiest times during the trading day because there is more volume when two markets are open at the same time. This makes sense because during those times, all the market participants are wheelin’ and dealin’, which means that more money is transferring hands.
Now, you’re probably looking at the Sydney open and thinking why it shifts two hours. You’d think that Sydney’s open would only move one hour when the U.S. adjusts for standard time, but remember that when the U.S. shifts one hour back, Sydney actually moves forward by one hour (seasons are opposite in Australia). You should always remember this if you ever plan to trade during that time period.
Let’s take a look at the average pip movement of the major currency pairs during each forex trading session.
| Pair | Tokyo | London | New York |
|---|---|---|---|
| EUR/USD | 76 | 114 | 92 |
| GBP/USD | 92 | 127 | 99 |
| USD/JPY | 51 | 66 | 59 |
| AUD/USD | 77 | 83 | 81 |
| NZD/USD | 62 | 72 | 70 |
| USD/CAD | 57 | 96 | 96 |
| USD/CHF | 67 | 102 | 83 |
| EUR/JPY | 102 | 129 | 107 |
| GBP/JPY | 118 | 151 | 132 |
| AUD/JPY | 98 | 107 | 103 |
| EUR/GBP | 78 | 61 | 47 |
| EUR/CHF | 79 | 109 | 84 |
From the table, you will see that the European session normally provides the most movement.
Let’s take a more in-depth look at each of the session, as well as those periods when the sessions overlap
TOKYO SESSION
The opening of the Tokyo session at 12:00 AM GMT marks the start of the Asian session. You should take note that the Tokyo session is sometimes referred to as the Asian session because Tokyo is the financial capital of Asia.
One thing worth noting is that Japan is the third largest forex trading center in the world.
This shouldn’t be too surprising since the yen is the third most traded currency, partaking in 16.50% of all forex transactions. Overall, about 21% of all forex transactions take place during this session.
Below is a table of the Asian session pip ranges of the major currency pairs.
| Pair | Tokyo |
|---|---|
| EUR/USD | 56 |
| GBP/USD | 54 |
| USD/JPY | 30 |
| AUD/USD | 65 |
| NZD/USD | 58 |
| USD/CAD | 39 |
| USD/CHF | 40 |
| EUR/JPY | 57 |
| GBP/JPY | 72 |
| AUD/JPY | 65 |
| EUR/GBP | 23 |
| EUR/CHF | – |
These pip values were calculated using averages of past data from the month of May 2012. Take note that these are NOT ABSOLUTE VALUES and can vary depending on liquidity and other market conditions. Also, the session range for EUR/CHF has not been included since the Swiss franc has been pegged to the euro at 1.2000 during the period.
Here some key characteristics that you should know about the Tokyo session:
- Action isn’t only limited to Japanese shores. Tons of forex transactions are made in other financial hot spots like Hong Kong, Singapore, and Sydney.
- The main market participants during the Tokyo session are commercial companies (exporters) and central banks. Remember, Japan’s economy is heavily export dependent and, with China also being a major trade player, there are a lot of transactions taking place on a daily basis.
- Liquidity can sometimes be very thin. There will be times when trading during this period will be like fishing – you might have to wait a long, long time before getting a nibble.
- It is more likely that you will see stronger moves in Asia Pacific currency pairs like AUD/USD and NZD/USD as opposed to non-Asia Pacific pairs like GBP/USD.
- During those times of thin liquidity, most pairs may stick within a range. This provides opportunities for short day trades or potential breakout trades later in the day.
- Most of the action takes place early in the session, when more economic data is released.
- Moves in the Tokyo session could set the tone for the rest of the day. Traders in latter sessions will look at what happened during the Tokyo session to help organize and evaluate what strategies to take in other sessions.
- Typically, after big moves in the preceding New York session, you may see consolidation during the Tokyo session.
Which Pairs Should You Trade?
Since the Tokyo session is when news from Australia, New Zealand, and Japan comes out, this presents a good opportunity to trade news events. Also, there could be more movement in yen pairs as a lot of yen is changing hands as Japanese companies are conducting business.
Take note that China is also an economic superpower, so whenever news comes out from China, it tends to create volatile moves. With Australia and Japan relying heavily on Chinese demand, we could see greater movement in AUD and JPY pairs when Chinese data comes in.
LONDON SESSION
Just when Asian market participants are starting to close shop, their European counterparts are just beginning their day.
While there are several financial centers all around Europe, it is London that market participants keep their eyes on.
Historically, London has always been at a center of trade, thanks to its strategic location. It’s no wonder that it is considered the forex capital of the world with thousands of businessmen making transactions every single minute. About 30% of all forex transactions happen during the London session.
Below is a table of the London session pip ranges of the major currency pairs.
| Pair | London |
|---|---|
| EUR/USD | 83 |
| GBP/USD | 82 |
| USD/JPY | 36 |
| AUD/USD | 60 |
| NZD/USD | 64 |
| USD/CAD | 66 |
| USD/CHF | 58 |
| EUR/JPY | 80 |
| GBP/JPY | 102 |
| AUD/JPY | 86 |
| EUR/GBP | 40 |
| EUR/CHF | – |
These pip values were calculated using averages of past data from the month of May 2012. Take note that these are NOT ABSOLUTE VALUES and can vary depending on liquidity and other market conditions. Also, the session range for EUR/CHF has not been included since the Swiss franc has been pegged to the euro at 1.2000 during the period.
Here are some neat facts about European session:
- Because the London session crosses with the two other major trading sessions–and with London being such a key financial center–a large chunk of forex transactions take place during this time. This leads to high liquidity and potentially lower transaction costs, i.e., lower pip spreads.
- Due to the large amount of transactions that take place, the London trading session is normally the most volatile session.
- Most trends begin during the London session, and they typically will continue until the beginning of the New York session.
- Volatility tends to die down in the middle of the session, as traders often go off to eat lunch before waiting for the New York trading period to begin.
- Trends can sometimes reverse at the end of the London session, as European traders may decide to lock in profits.
Which Pairs Should You Trade?
Because of the volume of transactions that take place, there is so much liquidity during the European session that almost any pair can be traded.
Of course, it may be best to stick with the majors (EUR/USD, GBP/USD, USD/JPY, and USD/CHF), as these normally have the tightest spreads.
Also, it is these pairs that are normally directly influenced by any news reports that come out during the European session.
You can also try the yen crosses (more specifically, EUR/JPY and GBP/JPY), as these tend to be pretty volatile at this time. Because these are cross pairs, the spreads might be a little wider though.
Next up, we have the New York session, a jungle where dreams are made of. Hey, isn’t that an Alicia Keys song?
NEW YORK SESSION
Right as European traders are getting back from their lunch breaks, the U.S. session begins at 8:00 am EST as traders start rolling into the office. Just like Asia and Europe, the U.S. session has one major financial center that the markets keep their eyes on. We’re talking of course, about the “City That Never Sleeps” – New York City baby! The concrete jungle where dreams are made of!
Below is a table of the New York session pip ranges of the major currency pairs.
| Pair | New York |
|---|---|
| EUR/USD | 77 |
| GBP/USD | 68 |
| USD/JPY | 34 |
| AUD/USD | 68 |
| NZD/USD | 62 |
| USD/CAD | 67 |
| USD/CHF | 56 |
| EUR/JPY | 72 |
| GBP/JPY | 77 |
| AUD/JPY | 71 |
| EUR/GBP | 36 |
| EUR/CHF | – |
These pip values were calculated using averages of past data from the month of May 2012. Take note that these are NOT ABSOLUTE VALUES and can vary depending on liquidity and other market conditions. Also, the session range for EUR/CHF has not been included since the Swiss franc has been pegged to the euro at 1.2000 during the period.
Here are some tips you should know about trading during the New york session.
- There is high liquidity during the morning, as it overlaps with the European session.
- Most economic reports are released near the start of the New York session. Remember, about 85% of all trades involve the dollar, so whenever big time U.S. economic data is released, it has the potential to move the markets.
- Once European markets close shop, liquidity and volatility tends to die down during the afternoon U.S. session.
- There is very little movement Friday afternoon, as Asian traders are out singing in karaoke bars while European traders head off to the pub to watch the soccer match.
- Also on Fridays, there is the chance of reversals in the second half of the session, as U.S. traders close their positions ahead of the weekend, in order to limit exposure to any weekend news.
Which Pairs Should You Trade?
Take note that there will be a ton of liquidity as both the U.S. and European markets will be open at the same time. You can bet that banks and multinational companies are burning up the telephone wires. This allows you to trade virtually any pair, although it would be best if you stuck to the major and minor pairs and avoid those weird ones.
Also, because the U.S. dollar is on the other side of the majority of transactions, everybody will be paying attention to U.S. data that is released. Should these reports come in better or worse than expected, it could dramatically shake up the markets, as the dollar will be jumping up and down.
Confused on which sessions start when? We made the next class just for you!
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