Forex Trading Sessions
The forex market is open every day of the week. However, on the weekends it is closed. Only because the currency is exchanged in decentralized markets worldwide is continuous trading feasible.
Sydney, Tokyo, London, and New York are the four primary trading sessions for the forex market. These are the most significant trading hubs, making up around 75% of daily Forex volume. The market is open between Sunday at 10 p.m. (UTC), once the Sydney session begins, and Friday at 10 p.m. (UTC), when the New York session ends for the weekend.
There is always one active forex session at any moment, although there are times when the marketplace is quiet. These times are often in the evening between 7 and 10 p.m. (UTC) after New York is drawing to a close before Sydney opens.
Characteristics of each trading session
The following outlines the different characteristics of each trading session.
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 pretty low. As a result, price moves will probably be tiny compared to other sessions.
Tokyo opens at 0:00 GMT, and trade activity increases. Considering that Europe and the US have far larger markets than Australia and Japan, price fluctuations are nevertheless regarded as moderate. During these periods, spreads on important pairings will likely be more extensive. Also, liquidity won’t be as strong as during the European and US sessions.
The Australian dollar, New Zealand dollar, and Japanese yen are the currencies traded the most during the Asian session. It is because they are the national currencies of the significant open markets. During this session, the most actively traded currency pairings are AUD/USD, AUDJPY, AUD/NZD, JPY/USD, NZD/JPY, and NZD/USD.
The London session begins at 8:00 GMT, and Tokyo is in its final business hour. A considerable number of dealers are now using the market. Because day traders are abandoning positions in Asia while day traders are entering places in Europe, this leads to more significant fluctuations than the Asian session alone. There aren’t any currency pairings that act differently throughout the European session; thus, all pairs may generally be traded.
Additionally, these sessions have significantly larger volumes, resulting in narrower spreads. In addition, the London session has the highest level of liquidity since the London market accounts for roughly 38% of total volume. Whereas New York (17%) and Japan (6%). Therefore, trading during the London session is a fantastic way to guarantee that you are trading in a market with lots of liquidity.
The New York session begins concurrently with the London session at 13:00 GMT. As a result, 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 then, and while trading volume is still more significant than it was during the Asian session, it is expected to decline as European traders leave. No specific currency pairings should or should not be traded during the American session.
When the Asian session ends and London opens, Tokyo and London split the hour. So from GMT 12:00 to GMT 17:00, London and New York both have four hours of trade time. Because so many more traders are trading at the same time during these overlaps, it has an impact on the market’s dynamics.
Market liquidity will increase when there are more active traders. Increased liquidity reduces the likelihood of slippage, increases the possibility that orders will be completed, and narrows spreads between currency pairings. As a result, trading is advantageous at this time.
There is increased activity when the Asian and European sessions overlap and when the European and American sessions overlap. Therefore, when trying to trade, it is advisable to exercise caution because the price movement can be quite volatile at this time and move quickly in both directions, especially at the beginning of the overlaps.
Also, since the market volume is shallow at these periods, caution is advised when the trading week begins with the Asian session and finishes with the New York session.
Caution at certain times
National holidays like the US or UK bank holidays prevent these nations from participating, causing the volume and liquidity of the currency market to fluctuate from normal.
News and information that affect the currency market are issued at specific intervals throughout the day. When this happens, the impact can be dramatic, causing the price to move swiftly in one way before immediately retracing. However, the low volume created by banks and institutions pulling their holdings from the market makes it possible to see swift and rapid price fluctuations in both directions.
The publishing times of these reports are available ahead of time, so volatile conditions can be avoided.