Are you set to unlock the secrets of the forex market's hidden rhythm?.
Sure you already have an idea of what forex is, why you should trade it and also who makes up the forex market. So now, it is time for you to learn when you are able to to trade.
If you have ever asked yourself why the charts seems to dance to a different tune throughout the day, or why some market hours is full of activity while others feel like a ghost town, then you have found the right article where you can obtain your answer.
It is time to be aware of various Forex Trading Sessions.
Yes, it is of no doubt that the forex market is open 24 hours a day from Mondays to Fridays, but that does not mean it is always very active the whole day.
You can make money trading when the market moves up and even when it moves down, but you will find it very difficult to make money when the market does not move at all.
In this article, you will find out about the various Forex Trading hours and the best sessions to enter a trade.
Table of Contents
What Are Forex Trading Sessions?
The forex market is decentralized and operates across different time zones. To structure trading activity, the market is divided into three primary sessions based on the world’s major financial centers:
- Asian Session
- London Session
- New York Session
Each session has distinct trading behaviors, influenced by the economic activity and market participants within its respective time zone.
Forex Trading Sessions
The forex market is said to operate in three main shifts, running 24 hours from Mondays to Fridays. These shift (Asian, European and North American Session) are nicknamed after their major financial hubs: Tokyo, London, and New York.
Sure you might be asking yourself buy why these cities? well they are not just random choices since they represent the times when their respective regions see the heaviest trading activity. These sessions are busiest cause that is when local banks, businesses and traders are most active in their respective markets.
1. Asian Forex Session (Tokyo)
The Asian market are by nature the first to see action immediately when liquidity is restored to the Forex market at the start of the week. Activity from this region of the globe is unofficially represented by the Tokyo capital markets and its spans from midnight to 9 am GMT.
Popular countries other than Japan also trade during this period. They include; Australia, China, Russia and New Zealand. It actually makes some sense that the start of the Asian sessions begins before the standard Tokyo hours looking at how scattered these markets are. Asian hours are often said to run between 11 p.m and 9 a.m GMT.
Below are the general features of this session:
- Lower Volatility
- More Range bound trading
- Regional Focus
- Influence of Economic data
2. European Forex Session (London)
The European session takes over to maintain the currency market active just before the Asian trading hours close. This Forex region is really dense and includes several major financial markets. London takes the honor of defining the outlook for the European session.
Due to the presence of other capital markets such as Germany and France, this trading session can begin before the official opening in the U.K. The end of the session is pushed back as volatility holds until after the close. European hours generally run from 8 a.m to 5. p.m, GMT.
Below are the general characteristics of the London Session
- High Liquidity
- Major Currency Pairs
- Market trends
- Euro News Impact
3. North American Forex Session
By the time the North American session comes online, the Asian markets have already been closed though the day is only halfway through for the European traders. Accounting for about one-third of forex trading world wide, this session is dominated by U.S activities. Activity in New York city is the reason for high volatility and participation rate for the session.
Just like the other trading sessions, 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.
The reasonable gap between the close of the U.S markets and the opening of Asian trading can mean a fall in liquidity. This puts the close of New York Trading at 10 p.m GMT as the North American Session closes.
Characteristics of the North American Session
- High Volatility
- USD-centric pairs
- Economic Data Impact
NOTE: It is said that each trading session has its own rhythm. Numerous traders think that Asian sessions build the foundation for the day, European sessions set the direction, and New York sessions often determine if those trends will hold.
Effects Of Overlapping Trading Sessions
If you have been in the Forex market for a while, you might have probably noticed that the Asian/European sessions overlap, sometimes creating more volatility due to increased trading activity during these hours. This shows the uptick in the hourly ranges in various currency pairs at 7 a.m. GMT.
You will notice that there will be a greater response to the Asian/European session overlaps and a less dramatic increase in price action during the European/U.S sessions concurrence if the currency pair is a cross made of currencies that are most actively traded during Asian and European hours. An example here would be EUR/JPY and GBP/JPY.
Nevertheless, the presence of scheduled event risk for each currency will still have a substantial influence on activity, regardless of the pair or its components respective session.
Attempting to enter a trade during a pair's peak trading hours can result in unfavorable entry prices, missed opportunities, or trades that violate long-term or fundamental trading strategies. High volatility during these periods can be advantageous for short-term traders who don't hold positions overnight.
Is Greenwich Mean Time (GMT) Still the Standard for Time?
In case you did not know, GMT is no longer the standard for worldwide time. The standard has been universal Time Coordinated (UTC) since the year 1972. Their times are the same but GMT is a time zone and UTC is a time standard.
Can I Trade Forex On Weekends?
No! The forex market is available 24 hours a day during the week but closes at about 5 p.m. on Fridays and reopens at 5 p.m. on Sundays.
Is There a Best Time to Trade Forex?
There's no official best time but many traders feel that 8 a.m. to noon ET holds great potential because of the overlap of the London and New York trading sessions. Substantial data is released in the U.S. in these hours. There are many participants and the market experiences volatility and liquidity, especially for USD pairs.
Closing Remark On Navigating Forex Trading Sessions
As earlier said in this article, the forex market is essentially open for business 24 hours a day, five days a week due to the three major forex trading sessions across the world. It offers substantial potential for profitable trading as a whole most especially if you know what you are doin in the market.
Because the Forex market is open for 24 hours, it does not mean you should not sleep and trade all the trading sessions. Lack of sleep can lead to exhaustion and errors in judgment if you are not a professional trader.
As an individual who also into Forex trading, I will advise you to focus your strategy on trading during the hours that make up the European/ U.S session overlap where volatility is still elevated even though Japanese markets are offline.