The Main Trading Sessions
Despite the Forex market is open 24 hours a day it doesn’t mean that the market is always active the whole day. FX traders can make money trading when the market moves up, and they can even earn money when the market moves down. However, it is extremely difficult to make any money when the market does not move at all.
The Forex maket can be divided into four major trading sessions that are: the Sydney Session, the Tokyo Session, the London Session and the New York Session. Babypips.com summarized the open and close times for each session in the following tables. Please note that the 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 or from daylight savings time (DST). The day within each month that a country may shift to or from DST also varies. All FinFX servers’ time zones are set to GMT+0 MetaTrader time, so daylight savings time is not observed.
Winter Trading Session Times (around October – April)
|New York Opening
New York Closing
Summer Trading Session Times (around April – October)
|New York Opening
New York Closing
Please note that because the seasons are opposite in Australia, this means that when London and New York turn back time during the summer, in Australia they do the opposite by moving the clock forward. In addition, Japan does not observe daylight savings time.
In between each session there is a period of time where the two sessions are open at the same time. For instance during the summer time, from 7:00 AM – 8:00 AM GMT, the Tokyo and London sessions overlap. These overlaps are the busiest times during the trading day because there is more volume and liquidity available when two markets are open at the same time and thus more money is transferring hands.
Here is a table that summarizes the average pip movement of the major currency pairs during the three main trading sessions:
The table shows that the London session normally provides the most pip movement during the day. Next, we will go through the three main sessions in detail.
Tokyo Session = Asian Session
Tokyo session is often referred to as the Asian session because Tokyo is the financial capital of Asia and with its population of 36 million people it is also the largest metropolitan area in the world. Japan is also the third largest Forex trading center in the world and the Japanese yen is the third most traded currency partaking in about 16,5 % of all Forex transactions.
When liquidity is restored to the FX market after the weekend passes, the Asian markets are the first to see action. Unofficially, activity from this part of the world is represented by the Tokyo capital markets, which are live from 12:00 PM to 6 AM GMT. However, according to Investopedia, there are many other countries with considerable pull that are present during this period for example China, Australia, New Zealand and Russia. Considering how scattered these markets are, it makes sense that the beginning and end of the Asian session are stretched beyond the standard Tokyo hours. Allowing for these different markets’ activity, Asian hours are often considered to run between 11:00 PM and 8:00 AM GMT.
Therefore we can say that the Asian session opens at 11:00 PM GMT and overall, about 21 % of all Forex Transactions take place during this session. The table below shows the Asian pip ranges of the major currency pairs:
According to Babypips.com the pip values were calculated using averages of past data from the month of May 2012. Thus the values presented 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 was attached to the euro at 1.2000 during the period.
Here are some key characteristics of the Asian session:
- Despite the most Forex transactions are made in Japan, tons of Forex transactions are made in other financial hot spots like Hong Kong, Singapore and Sydney.
- The main market participants during the Asian session are commercial companies (exporters) and central banks. This is due to the fact that 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 quite thin. During these times most pairs may stay within a range providing opportunities for short day trades or potential breakout trades later during the day.
- It is more likely to see stronger moves among the Asia Pacific currency pairs such as AUD/USD and NZD/USD as opposed to non-Asia pacific pairs like GBP/USD.
- Most of the action takes place early in the session, when more economic data is released.
- Moves in the Tokyo session may set the tone for the rest of the day. Traders in latter sessions often look at what happened during the Tokyo session to help organize and evaluate what strategies to take in other sessions.
- Often, if there have been big moves during the preceding New York session, consolidation can be seen during the Asian session.
Which pairs are commonly traded during the Asian session?
- Pairs that include JPY
- Pairs that include AUD
- Pairs that include NZD
This is simply because the Tokyo session is on when news from Australia, New Zealand and Japan come out presenting a good opportunity to trade. Usually, there is more movement in JPY pairs as a lot of yen is changed as Japanese companies are conducting business. Furthermore, since China is an economic super power, the news from China tends to create volatile moves. Because Australia and Japan are relying heavily on Chinese demand, it is possible to see greater movements in AUD and JPY pairs when the Chinese data come in.
London Session = European Session
There are several financial centers that are located all around Europe, but it is London that market participants follow. London has historically always been at the center of trade mostly thanks to its strategic location. Nowadays the city is considered as the Forex capital of the world with thousands of businessmen making transactions every single minute. This means that about 30 % of all Forex transactions happen during the London session.
Official business hours in London run between 7:30 AM and 3:30 AM GMT. However, again this trading period is expanded due to other capital markets’ presence (including Germany and France) before the official open in the U.K.; while the end of the session is pushed back as volatility holds until the London fix after the close. Therefore, the European hours are typically seen as running from 7:00 AM to 4 PM GMT. The table below shows the pip ranges of the major currency pairs during the European session:
Like with the Asian session, these values were calculated by using averages of past data from the month of May 2012. Thus the values presented 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 was attached to the euro at 1.2000 during the period.
Here are some key characteristics of the European session:
- Because the London session crosses with the two other major trading sessions and the city itself is a massive financial center a huge amount of Forex transactions are taking place during the European session. This leads to high liquidity and lower pip spreads.
- The London trading session is normally the most volatile session due to the large amount of transactions that take place.
- Volatility, however, tends to reduce in the middle of the session as traders often go off to have lunch before waiting the New York session to begin.
- Most trends begin during the London session, and they typically will continue until the beginning of the New York session.
- These trends can sometimes reverse at the end of the London session, as European traders may decide to lock in profits.
Which pairs are commonly traded during the European session?
The volume of transactions that take place during the European session means that there is so much liquidity available during the session that almost any pair can be traded. The majors (pairs with USD) normally have the tightest spreads and those pairs are normally directly influenced by any news reports that come out during the European session. Alternatively, the yen crosses (EUR/JPY & GBP/JPY) tend to be volatile at this time.
New York Session = North American Session
As it was with Asia and Europe, the North American session has one major financial center that the markets keep their eyes on – New York Session. According to the Global Financial Centers Index New York City ranks second right after London in the list of top ten financial centers around the world.
|2||New York City||786|
The table below shows the pip ranges of the major currency pairs during the North American session:
|Pair||North American Session|
Again the values were calculated by using averages of past data from the month of May 2012 and the session range for EUR/CHF has not been included since the Swiss franc was attached to the euro at 1.2000 during the period.
Here are some key characteristics of the New York session:
- There is a high amount of liquidity available during the morning, as the session overlaps with the European session.
- Most of the economic reports are released near the start of the New York session. Because approximately 85 % of all trades involve the USD, so whenever big time U.S. economic data is released, it has the potential to move the markets.
- Once the European markets close, liquidity and volatility are reduced during the afternoon U.S. session.
- There is very little movement on Friday afternoon, as Asian and European traders start enjoying their weekends. However, on Fridays, there is also the chance of reversals in the later part 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 are commonly traded during the European session?
- All major pairs
- All minor pairs
There is a massive amount of liquidity available as both the North American and European markets will be open at the same time, which means that it is possible to trade any pair, but if you are a beginner it may be best to stick with major and minor pairs.
In addition, because the USD is on the other side of the majority of transactions, everyone will be paying attention to U.S. data that is released. These reports can dramatically shake up the markets and thus allow the USD to go up or down very rapidly.
Best Days of Week to Trade
The London session is the busiest out of all the other trading sessions, but in addition to that there are also certain days in the week where all the markets tend to show more movement. The table below shows the average pip range for the major pairs for each day of the week:
The table shows that for beginners it would probably be best to trade during the middle of the week, since the most action is happening then. Fridays are usually busy until 5 PM GMT and then the market slows down considerably until the New York session closes at 10 PM GMT. Lastly, we summarize the best and worst times to trade Forex for a beginner.
Best times to trade for a beginner:
- When two sessions are overlapping. This means that most liquidity and lowest spreads are available as well as these are also the times where major news events come out to potentially spark some volatility and directional movements.
- The European session tends to be the busiest one out of the three.
- The middle of the week typically shows the most movement, as the pip range widens for most of the major currency pairs.
Worst times to trade for a beginner:
- Sundays – The lowest amount of liquidity available.
- Fridays after 5 PM GMT – Again lower amount of liquidity, because people are getting ready for the weekend.
- Holidays or major events – Everybody is either taking a break or following the big event.