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Forex Trading Sessions Explained

Forex Trading Sessions Explained

Posted by: Mike Markarian

Local Time                            US Eastern Standard Time

New York       8 a.m. to 5 p.m.                    8 a.m. to 5 p.m.

London          8 a.m. to 4 p.m.                    3 a.m. to 11. a.m.

Tokyo             9 a.m. to 6 p.m.                    8 p.m. to 5 a.m.

Sydney           7 a.m. to 4 p.m.                     5 p.m. to 2 a.m.

(be careful to watch for any changes in your region to Daylight Savings Time, or other points when the clock is moved forward or backward).

We all know that there is only one Foreign Exchange Market that covers the globe and that is open 24/7.

But trading forex requires movement, ideally a lot of movement, and there are times when the market for a  given currency becomes sluggish as most of the traders have closed down for the night.

For example, the New York forex trading session gets very active from 8 a.m. to 5 p.m. Eastern Standard Time (US Eastern Time), (Monday to Friday) but then slows down after 5 in the evening. Around midnight in New York, it gets pretty slow.

Certainly, anything can happen, at any time on the forex market. But your chances for what professionals call “orderly trading,” meaning trading in which you can read the charts in technical terms (and not worry about some outlandish local event interfering), are greatest during the local opening hours.

This is particularly true of the London market, which is “open” from 8 a.m. to 4 p.m. local time (BST) from Monday to Friday. I knew a professional trader in Tampa, Florida who used to get up at 3 a.m., Monday to Friday, and work for five hours every day. Then he quit – he never traded longer. He said that it was worth getting up in the wee hours for the orderly trading at the time – and his results bore him out.

It is true that London is a particularly pattern-bound exchange, if you are trading GBP of course. If you want to try it out, study it for a week or two and see if you can identify repeated movements.

But London is the largest trading session in the world, so a lot happens there. It is not unusual for trends set in London to carry on into the New York session. When the London session overlaps others, this means that, at those times, trading volume is extremely high. This is the time to consider very short-term trades if you are working in these currencies. Your broker may also offer you tighter spreads if you trade during these periods.

 

Do watch for trends that start in London and finish in New York. That is a particularly interesting approach to trading USD and GBP and the euro (but not the Swiss franc, CHF, because it is pegged to the euro at a fixed rate).

The London session overlaps that of  New York from 1 p.m. to 4 p.m. UK time (BST), which corresponds to 6 p.m. to 9 p.m. US Eastern time.

 

Tokyo used to be a very orderly exchange as well, but in recent years, the pressure on the national economy has made JPY less of a safe harbour than it used to be. Still, the Tokyo session is often called the “Asian Session” because of Japan’s importance in the region’s economies.

Despite the fact that Tokyo is one of the largest Forex Trading sessions in the world, there are times when trading can be amazingly slow. You may have to wait for a trade to go through. To avoid this, trade starting at the opening of the session if you can for the next few hours when economic news from around the world often drives movement.

What about China? You may have been surprised to notice that we discuss Asia without mentioning the Chinese yuan.

What you have to understand is China’s central bank, the People’s Bank of China (PBoC) fixes the rate of the yuan every day. This announcement does have an important influence on all forex markets, so you should be aware of it and understand it in any case. How the PBoC fixes the Chinese Yuan provides a good indication of how the central bank views the Chinese economic outlook, and that outlook influences all of the economies in Asia. China is a major market for all of Asia (and the rest of the world) so a weak indication from the PBoC might affect the AUD, the JPY and even the euro and the dollar.

As for the Sydney session, it tends to get swallowed up in the Asian session. But there are some specific characteristics to take advantage of. Volatility is relatively low during the Sydney session, if you are trading the major currency pairs.  Obviously the AUD is the currency to watch, but you should be careful about announcements from the Reserve Bank of Australia (RBA), the central bank. The RBA is active in market intervention, so a move from them can rip right through a carefully thought out trading strategy.

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