The Forex market is open 24/5 and generates a massive daily turnover of over $4 trillion. Each week you can start trading from Monday morning when the Asian session opens, until Friday evening when the American session closes. The Forex market is known to offer very high liquidity. Some of the trading hours, however, are more dynamic than others and the same rule applies to certain days of the week. Knowing the best times to trade Forex is important because you can take advantage of higher market volatility. In this article, we’ll look at the main trading sessions in detail and see what trading opportunities they present.
Three main trading sessions and when they overlap:
There are three main trading sessions: the London session, which starts at 8:00 am GMT and closes at 5:00 pm GMT, the New York session from 1:00 pm GMT to 10:00 pm GMT and the Tokyo session which lasts from 00:00 GMT to 9:00 GMT on the following day. Since some of the trading sessions overlap, this is the time when trading volumes reach their peak. The European and the American sessions overlap from 1 pm to 5 pm GMT, while the Japanese and the European sessions overlap from 8:00 GMT to 9:00 GMT.
The European session starts when the Japanese session is near its closing time. This fact explains the big market movements – a great number of the traders who have been trading in Asia now continue to make deals in Europe. The London session is characterized by big volumes (over one third of the total Forex turnover) and very tight spreads. Additionally, since the businesses in Europe are open, they trade with companies from other countries and the Euro is usually traded in high volumes. When we speak about the volatility pip range during the London session you can expect fluctuations of more than 100 – 140 pips for the major currency pairs. EUR/USD, USD/JPY, GBP/USD and USD/CHF form the majority of all deals and usually this is the time when they are most easily influenced by breaking economic news.
Market trends that have emerged during the London session often continue in the New York session. This is also a great time to trade USD/CHF and GBP/JPY because the volumes and volatility of these pairs tend to rise. The US dollar is needed for these transactions but is also used to convert the currencies of the foreign investors who become very active as the US bond and stock markets open. Some of the currency pairs to watch during the US session include: GBP/CHF, USD/CAD and GBP/USD. The New York trade session is the most volatile of all Forex sessions and this is the time when major US economic data is released. Another phenomenon that is worth mentioning is that most EUR/USD fluctuations appear at the beginning of the American trading session.
During the Tokyo trading session you can expect higher trading volumes of the Japanese Yen (JPY) because Japanese companies will be doing business with companies from foreign countries and using the JPY currency. The Asian session is usually considered more quiet and predictable than the other two sessions. However, it is the first market to open after the weekend’s break and that’s why you can expect high liquid markets on Monday. During the Asian session, the Tokyo, Australian, Singapore, and Russian markets are open and currency pairs with JPY, AUD, SGD, and RUB usually have higher trading volumes then. Some of the currency pairs to watch during the Tokyo session include: EUR/JPY, USD/JPY, EUR/USD, NZD/USD and AUD/USD. Some traders believe that due to the slow pace of the Asian session it is best to keep your positions for longer time periods instead of trying to make short-term speculations.
Overall, each of the major currencies is most traded during its own trading session. In addition, the best trading hours, the ones that guarantee a greater pool of liquidity, are usually when the major trading sessions overlap. The 4-hour overlap of the US and the European sessions is undoubtedly the period with greatest price action, enhanced by numerous economic data releases. The best days for Forex trading are thought to be in the middle of the week when the currencies show most movements and wider pip ranges.
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