All About The Forex Market Sessions

In the forex market, timing is critical when formulating effective trading strategies. More often than not, traders are indecisive about the best time to make their buys and sells. This is especially so since the foreign exchange market is open 24 hours a day from Monday to Friday. Investors, institutions, and banks globally trade at any time of the day, maximizing their profits. However, the level of activity varies depending on the session, and one will realize high volatility and stagnation during the day. The different currency pairs also vary in volatility and volume, depending on the demography of active traders online.

Here we will expound on the three major trading sessions in the forex market. These sessions are either named after continents or major towns: the Tokyo session/the Asian session, the London session/the European session, and the New York session/the North American session. Most traders, rather than spending 24 hours on their screens doing market analysis and trading, prefer to focus on a particular session most convenient for them. So let's dig deeper into each session.

Tokyo/Asian Session

This session opens in Sydney at about 22.00 GMT and goes all the way to 8.00 GMT at the close of Tokyo. Japan is the world's third-largest forex hub. Therefore it's not surprising that the Asian session is also the Tokyo session. Without a doubt, the most traded currency pair involves the Yen. Other major active players in the Asian session are China, Singapore, Hongkong, Australia, and New Zealand. At times liquidity is usually thin and hence less significant price action as pairs are trading within a range. Nevertheless, most activity occurs at the beginning of the session when economic news and updates from various countries are being read.

London/European Session

London is viewed as the big boss in the forex market as large chunks of transactions occur during this period. As Tokyo closes and the Asian part of the world is closing their businesses, the European session is picking up pace. High volatility and large volume are observed as many active and big forex players are in this part of the world. It goes without saying that liquidity is high, and the pip spread, cost of a transaction, is relatively low. Trends will begin to form in this session due to high activity and extend to the New York session, but sometimes they reverse as the end of the session approaches when the European traders lock their profits. Besides London, other financial centers in Europe are Amsterdam, Luxembourg, Zurich, Frankfurt, Paris, and Edinburgh. The session runs from 8.00 GMT to about 16.00 GMT.

New York/North American Session

The session starts at 13:00 GMT up to about 21:00 GMT. Economic activities in the United States influence activities in this session substantially. Nonetheless, Canada, Mexico, and other South American countries are also active players. A large number of transactions involve the dollar. Therefore, economic reports and data from the U.S tend to move the markets. Liquidity tends to be high in the morning when both the New York and London sessions overlap, although in afternoon liquidity and volatility decreases. Also, keep in mind that this session is less active on Friday afternoons and may experience reversals as most people close their trades ahead of the weekends as they prepare to "rave it up."

It is worth mentioning that high volatility is always experienced during overlaps between these sessions due to increased trading activities. The major currency cross pairs respond well during the Asian/European session overlap. The European/American overlap session is also a good zone for volatility traders.

Conclusion

Depending on your trading plan and strategy, you should be able to identify your best time to enter and exit the market. In most cases, short term traders trade volatility since they can get in and out within a few hours or a few days. It’s also crucial to include in your trading strategy the time frames of your most preferred currencies. Keep in mind that forex is just like any other business, and you should put in the effort. Make every trade count.