In this post, we hope to give you some useful information for you to truly understand how the different forex trading hours work and to come away with a couple of different techniques in order to be able to capitalize on the characteristics of each session.
So as you all may know the forex market never sleeps. The forex market runs 24 hours a day and five and a half days a week. So it’s definitely a market that is filled with different types of opportunities. And you know that this is an advantage and a disadvantage for many traders.
Advantage and Disadvantage
The advantage is that you can cater to your trading based on your lifestyle because the market is always open. it’s a disadvantage however is that trading actually can happen even when you sleep overnight. Actions in the forex market happens in many different forms because the participants who have trade forex range from banks central banks investment managers hedge funds corporations and even us.
So there’s a lot of different market participants and that’s why it’s important to truly understand the unique characteristics of each session. So I’m going to start with the basics but bear with me because I promise you there’s going to be useful information for those of you that are more intermediate and advanced but it is important to know that the forex day actually starts in Asia when the Tokyo markets open because it’s obviously the next day.
So Tokyo markets open at around 8:00 p.m. New York time. Now sometimes you have a little bit of volatility before because the Australian and New Zealand markets opened before the Tokyo markets oftentimes you may have Australian or New Zealand data moving the affects market particularly those currencies before Tokyo opens but officially Tokyo opens at around 8:00 p.m. New York time and that’s when you get most of the Tokyo traders joining the market.
Now after Tokyo market opens we have the London open the London Open starts at 3 a.m. New York time 8 a.m. GMT and that’s when you get the bulk of trading activity because actually the most active period in the forex market we looked at it from isolated time zone perspective is actually the London session. Now of course the most active session is when we have the London U.S. overlap where the U.S. markets open at 8:00 a.m. New York time and that pretty much overlaps with the London session until noon which is 12 p.m. York Time.
London And New York Session overlaps
I’m sure all of you know that the most active sessions is when we have the New York London overlap which is basically between 8:00 a.m. to 12:00 noon New York time and the London Tokyo or London Asian overlap which can also be pretty active. Now this is really great for informational purposes but what about what do we need to know as traders. Well first and foremost on there’s some interesting behavioral characteristics of each session.
Market Risk Event Timings
And if we take a look at when the market starts the Asian session liquidity actually begins coming in from New Zealand and that can happen pretty much around 6 or 7 New York time sometimes depending on time zone time of year. We can have RBA rate decisions at 3:00 p.m. New York time and 5 p.m. New York time. So basically you know liquidity starts coming in with Wellington and that’s actually quite if we do have key data that she can lead to up quite a bit of movement in Aussie and Kiwi or some you know wide movements because only Australia and New Zealand’s open. So the movements can get quite exaggerated.
Now the main characteristic about the Asian trading session is that ranges tend to hold. it’s usually very quiet trading session except for if we have a big news or if we have something of a big breakout there, actually can be quite a bit of a continuation particularly in dollar yen. But generally speaking on a regular trading day it is the currencies generally range bound as support and resistance are respected during the London trading session.
Liquidity basically comes from Europe and you tend to have very fast active moves particularly during the London open and especially when data comes out. And the US session can get basically is a bit hit behaviors from both the London and Asia trust trading session.
As you all know the overlap between the US and London Sessions symbolic lows most liquid period of the day and what oftentimes will happen is that highs and lows can often be set during this overlap. And at the start of the US session oftentimes what we see is a continuation of the momentum that’s happening in the London session especially before we have U.S. data. And before the U.S. stock market opens so there’s a lot of really unique characteristics.
So to summarize that the London trading session in the early London trading session you can oftentimes have breakouts because London traders are coming in. They’re assessing what’s happened in North America and Asia. They’re looking at their order boards sometimes as even stops or key levels that are being run. And so that can lead to breakouts in currencies particularly the European currencies.
New York Session
During the initial start of the London trading session it’s a very fast moving session. You know quite a bit of a roller coaster ride particularly in pounds sometimes. And there’s quite a bit of volatility and it’s you know; if you like volatility, it could be quite an exciting time to trade the US session in the early U.S. session. When we talk about early U.S session, we generally talk about between 630 to 830 New York Times has been continuation of what could be happening during the European session and the moves actually.
Highs and Lows
The other thing to note is that highs and lows of the day in our experience are often times set during the US and London overlap when we have the most of action in the markets. And so I think it’s something that’s quite important to us to remember as well. And then during the Asian trading session you know, just as we mentioned before, It can be range trading. its a fairly quiet trading session, except when there’s data. And when there’s a sudden announcement or speech by a Reserve Bank of Australia, Reserve Bank of New Zealand or Bank of Japan official, that can actually cause a very big move that can have quite create a very rapid continuation because of the lack of liquidity during that session.
So looking at the 5 min chart of the EURUSD above, we can see that the Tokyo market opens at 8:00 PM New York time or in this case, its 3:00 AM in my Broker’s server time. Next, the London market opens at 3:00 Am New York time or in the case of the screenshot above, its 10:00 AM in my Broker’s server time. Followed by the New York market opening at around 8:00 AM New York time or 15:00 in my Broker’s server time.
As you can see in the screenshot above, the Asian trading sessions which are from 3:00 to 10:00 server time ( 8:00 PM to 3:00 New York time) tend to have the lowest amount of average Pip moves. The wildest moves happened right after the London market opens then kind of subsides in a while then right after the New York opens where the market overlaps, is where breakouts usually happens and then after 19:00 server time (12:00 PM New york time), the market starts to decline as we get to the US close.
So what does this tell us. This tells us that with range trading, the volatility tends to be much lower during the Asian trading sessions and we tend to have breakouts during the time when data is released maybe during the London open and most certainly we have the biggest moves between eight and 10 New York time.
So that’s something I think that is very very important to keep in mind. Each of the major currency pairs also you know will move based upon when data that comes out. So the dollar moves a lot when the London open U.S. data which comes out a 30 New York Time also sometimes at 10 a.m. New York time and of course FOMC at 2:00 p.m. that’s going to be important as well Euro moves when we had the London open Euro moves when we have euro zone data Euro moves where we have U.S. data. So you know all of these different times of day are very important for the euro dollar Pound’s moves when we have the London open it’s quite volatile during the London open also quite a bit of volatility during the week we have UK data for 30 New York time and when we have US economic releases basically coming out at 830 New York time yen moves a lot when we have the Tokyo open.
We have Japanese data around 10 p.m. New York time and then when we have we have the Japanese data company come out 10:00 p.m. New York time or at 1:00 a.m. your time and then again you know it moves quite a bit when we have the U.S. economic releases at 830 New York time Aussie we brokenness up differently because Aussie not only moves when the markets open and the US session based on U.S. data but also in reaction to Australian and Chinese data which have different times of days and they range between seven thirty p.m. your time all the way to about 130 a.m. your time the New Zealand dollar.
Very similar story but New Zealand data tends to come out earlier around for five New York time and then the Canadian dollar will move with us data when we have Canadian data similar to the US Canadian data can be released anywhere between a 30 New York Times 10:00 a.m. New York time and then oil inventories are often released around ten thirty New York time or is it released exactly at ten thirty New York Times so that’s a pretty volatile time of day for the Canadian dollar as well.
So with all of this in mind, how can you use this information to plan your trading day? it’s a lot of information, and I think it all boils down to asking yourself two questions.
Number one question is, what type of trader are you?
Are you a range trader? a news trader? or a breakout trader? or you don’t care about any of these things. If you’re an intraday trader and you’re a range trader, then obviously you want to trade where the markets are quiet or don’t trade when data is coming out. The best and the most successful times for a range trade is when range trader – during the Asian trading session – place their trades during the Asian trading session. If you’re a breakout trader then the best time to trade is when we had the U.S and European overlap.
If you’re a news trader, you can time your trades to the specific time of day. If you are a trader that doesn’t care about any of these things and you hold positions for a couple of days, then you know it really does not matter. The trading sessions matter a lot less to you although historically, it seems like the most successful traders tend to lay out their positions when we have the Asian during the Asian trading sessions where things are a little quieter.
The second question you need to ask yourself is what time of day do you have available for trade?
Because, if you live in the US and you come home on you work during the day and you come home and the only time you have to trade is during Asia then perhaps that’s the only time you trade and you have to focus on range trading. If you’re an early bird, you get up early like I do and you wanna trade before work then maybe you want to trade between six thirty and eight thirty in New York time where you can oftentimes have a lot of continuation opportunities and maybe even position for some breakouts during the North American session.
So you take all this information in minds while we share with you in future posts some of the trading strategies for trading the various trading sessions so you can use those information in the context of knowing the unique characteristics of each of these trading sessions.
Knowing that the U.S. trading session oftentimes is a momentum session, where your highs and lows for the days are set. The London session won’t have fast active moves and maybe even fast active reversals and the Asian session is when things are much quieter and calmer. Support and resistance tend to be respected and ranges tend to be held.
So with all of these information, hopefully will put you in the right mindset for understanding the unique characteristics of each of the forex trading hours. Thank you.