The ability to trade for 24 hours a day, seven days a week, is a huge benefit in forex trading. However, the trading day is divided into several trading sessions, including the European, American, and Asian sessions, also referred to as the London, New York, Tokyo, or Sydney sessions. This is due to the fact that different countries trade on different exchanges and at various times in the forex market. Lets find out how you can be the best forex broker in world.
Each trading session has its own distinct qualities.
These trading sessions all have different characteristics since they are all influenced by the economies that are in motion. There isn’t always a “optimal” moment to trade foreign exchange.
The volume of currency exchange between some nations and their trading partners is likely to increase when those nations are open for business. For instance, during the Asian session, businesses in Japan will be operating and trading currencies to conduct business with counterparties abroad. A significant amount of yen will be exchanged with the national currencies of the companies that Japanese businesses deal with.
The euro is likely to be traded in greater volume while Europe’s businesses are open since they trade with enterprises in other nations. Since they do not conduct business with companies outside of Europe at night when their firms are closed, the trading activity of the euro will be lower. Consequently, the nations that are trading at the time will immediately correlate with the currencies being exchanged, regardless of the session that is open. This implies that the activity of specific currency pairs, the market volume, and the volatility will vary slightly from trading session to trading session.
Sessions of currency trading
There are technically no open sessions on the weekends. Trading begins each week at the opening of the Sydney session and ends each week at the conclusion of the New York session. The time and day will, however, depend on where you are in the world. In Japan, Monday AM marks the start of the trading week. In the UK, on the other hand, this will actually take place on Sunday night.
The following table displays the best times to trade hours according to GMT. The table shows that the trading day begins at 22:00 GMT with the Asian session in Sydney and ends at 22:00 GMT with the New York session.
Because GMT never changes, you can use it in any time zone by using the trading sessions that are displayed in the table above. You must, however, change it to reflect the time zone you are in. For the winter, you would use GMT +1 hour, for instance, if you were in Central Europe. You should utilize GMT +2 hours throughout the summer when the time changes.
Each trading session’s characteristics
The many traits of each trading session are described here.
When Sydney opens at 22:00 GMT, the Asian session begins. Since there is only one market open at this time—Sydney—the volumes transacted are quite low, and as a result, price moves are probably going to be tiny compared to other sessions.
Tokyo opens at 0:00 GMT, and trade activity increases. Considering that Europe and the US have much larger markets than Australia and Japan do, price changes there are nevertheless considered to be moderate. During these times, spreads on important pairings are probably going to be a little bit larger, and liquidity won’t be as strong as it is during the European and US sessions.
The Australian dollar, New Zealand dollar, and Japanese yen are the three currencies that are traded the most during the Asian session because they are the national currencies of the major markets that are open at that time. During this session, the most actively traded currency pairs are the AUD/USD, AUDJPY, AUD/NZD, JPY/USD, NZD/JPY, and NZD/USD.
The European session
The London session begins at 8:00 GMT, and Tokyo is in its final hour of business. The market is currently being used by a huge number of traders. Because day traders are abandoning positions in Asia while day traders are entering positions in Europe, this leads to bigger fluctuations than the Asian session alone. There aren’t any currency pairs that act differently throughout the European session, thus all pairs can generally be traded. Additionally, these sessions have significantly larger volume, which results in narrower spreads.
In addition, the London session has the highest level of liquidity because the London market accounts for roughly 38% of total volume, which is greater than New York (17%) and Japan (6%) combined. To ensure that you are trading in a market with significant liquidity, it is best to start trading when the London session is open.
United States session
The New York session begins concurrently with the London session at 13:00 GMT. Volume and volatility are often higher when the participants from the London and New York sessions are combined. After the London session ends at 17:00 GMT, New York trades on its own until the Asian session resumes.
Only New York is open at that time, and while trading volume is still larger than it was during the Asian session, it is likely to decline as European traders leave. There are no specific currency pairs that should or should not be traded during the American session.