Forex Trading Sessions and the Secret to Trading Them
As you probably know, the forex trading is open 24 hours a day. The forex does not close down in the evenings like stock markets do – instead, it is open 24 hours a day except on the weekend.
The reason that the currency markets are open is because there are banks throughout the world that buy and sell currencies. As a result, the forex trading day is divided up into 3 sessions – each session named for the major city that is open.
They are as follows: New York (U.S. session), Tokyo (Asian), and London (European) session.
A key to remember though is that although the forex is open 24 hours a day, each session has a distinct opening and closing time.
And this gives us the opportunity as traders to take advantage of these trading sessions and to understand their differences.
1. The most active sessions are the London, then New York, and then Asian. Generally, the London and New York are very active while Tokyo is the quietest of the 3. This means that if you are counting on big moves, there is a better chance of them happening during the London and New York hours.
This also means that if your strategy depends on capturing a large number of low-risk, small, 1-2 pips moves, then the Asian hours would be for you.
2. Some trading time overlap – specifically the London and New York hours. There is a time (8AM to noon Eastern) when both the London and New York banks are open. Since these are the times when there is the most volume, you can imagine that trading from 8AM to noon Eastern is full of fun and exciting times. And you would be right!
If you are looking for major moves, they are more likely to happen when the London and NY times overlap.
3. Dramatic changes in market prices can happen at session openings. This is because different parts of the world are opening, and they each have different ideas on what the market should do. Also, major economic news releases occur around the beginning of business hours for these cities, and these economic releases tend to affect the forex prices dramatically.