Forex Trading Sessions
Time is money and in Forex industry this is true. The Forex Market is 24 hours open during weekdays but this does not necessarily mean that you should trade Forex at any time. Understanding the different Forex trading sessions is key to identifying the best times to trade and the best forex assets to trade. This is because volatility varies during different times of the day because of the trading sessions.
There are generally four main trading sessions: the Sydney session, Tokyo session, London Session, and the New York session. Both the Sydney and Tokyo sessions are customarily referred to as Asian sessions. This is why Forex is usually referred to as a 3-session market: Asian, London, and New York.
Here are the different characteristics of different forex trading sessions:
Asian Session
The Asian session begins in the Sydney market. Although it refers as the Sydney market, it’s actually the opening of New Zealand’s financial markets. The Asia session continues until Tokyo closes at 08:00 GMT. Asian sessions are typically characterized by low liquidity, with most currency pairs trading within a range. Low liquidity also means that currency pairs generally trade with relatively large spreads. Most of the activity during the Asian session takes place early in the morning when relevant economic news is released. The best currencies to trade during the Asia session are Japanese Yen, Australian Dollars and New Zealand Dollars. Forex traders should also pay attention to news releases from statistical agencies in Australia, New Zealand and Japan.
London/European Session
The London session opens at 0800hrs GMT, once the Tokyo session closes. This is the largest forex trading session, accounting for over 32% of all activity. London is a major financial center in the world and is used as the reference for all major European financial centers. The London session ends at 16:00 GMT. The London session is characterized by large amounts of liquidity and high volatility. Many currency pairs have their biggest price movements during the London session.
New York/North American Session
The New York session will begin at 13:00 GMT while the London session is underway. New sessions end at 21:00 GMT. The New York session is also characterized by an early morning activity that overlaps with the open London session. Most movements are driven by the US dollar, the most traded currency and the most influential currency in the forex market. Furthermore, most news and events that affect the US dollar are usually released early in New York’s opening hours. Liquidity and volatility are high in the early morning (13:00 GMT – 16:00 GMT) when London and New York overlap, and spreads are tight for most assets. However, volatility and liquidity tend to decrease in the second half of the New York session. USD is the cue provider during the New York session, allowing traders to trade all major pairs.
When is the Best Time to Trade?
The best time to trade is up to you, the trader based on your availability, time zone, or trading style. If you only want to target a few in a low volatility environment, the Asian trading sessions are a good choice. However, if you want high volatility and large price movements, we recommend trading early in the London or New York sessions.
Timezones and availability also determine the best asset for trading. For example, if you can trade from 08:00 GMT to 12:00 GMT (during the London session), we recommend trading the EUR and GBP pair.
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