Forex Pairs To Trade During Asian Session – One of the interesting features of the foreign exchange market is that it is open 24 hours a day. 2009 Trade allows investors around the world to trade during normal business hours, after work or even in the middle of the night. However, not all times of the day are equal when it comes to Forex trading.
Although there is always a market for this most liquid asset class called forex, there are times when price action fluctuates constantly and periods when it is quiet. In addition, different currency pairs show different activity during certain times of the trading day due to the overall demographics of market participants online at that time.
Forex Pairs To Trade During Asian Session
In this article we will cover three major trading sessions, analyze the type of market activity that can be expected during different time periods and show how this knowledge can be adapted to a trading plan.
Trading Sessions. Stock And Forex Markets Hours. Open And Closing Times.
The 24-hour forex market offers a great advantage to many institutional and individual traders, as it guarantees liquidity and the ability to trade at any time. Although currencies can be traded at any time, an individual trader can only control one position for so long.
Since most traders cannot watch the market 24/7, opportunities will be missed, or worse: when a jump in volatility causes a move against an established position when the trader is not around. Therefore, a trader must be aware of periods of market volatility and decide when it is best to reduce that risk based on their trading style.
Traditionally, the market is divided into three high-level activity sessions: the Asian, European and North American sessions, also known as the Tokyo, London and New York sessions. These names are used interchangeably, as the three cities represent the most important financial centers of each region. Markets are most active when these three powerhouses are doing business, as most banks and corporations in their respective regions conduct their daily transactions, and there is a greater concentration of speculators online.
When liquidity is restored in the Forex (or FX) market at the beginning of the week, Asian markets are the first to see the action. Officially, activity in this part of the world is represented by the capital markets of Tokyo and lasts from midnight to 6:00 am. Greenwich Mean Time (GMT).
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However, there are many other notable countries in this period, including China, Australia, New Zealand and Russia. Given how spread out these markets are, it makes sense to extend the start and end of the Asian session beyond normal Tokyo hours. Asian time is believed to be between 11 p.m. and 08:00 GMT, accounting for the activity within these various markets.
The European session includes keeping the currency market active before the end of Asian trading hours. This FX time zone is very dense and includes many important financial markets. London has so far had the honor of setting the parameters for the European session.
This trading period is also extended due to the presence of other capital markets (including Germany and France) before the official opening in the UK, and the end of the session is pushed back to after the volatility has closed. Therefore, European opening hours are usually 07:00 to 16:00. GMT.
Asian markets have already been closed for several hours by the time the North American session goes online, but the day is halfway through for European traders. The Western session is dominated by US activities, with contributions from Canada, Mexico and South American countries. Therefore, it is not surprising that the activity in New York marked the session’s high volatility and participation.
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Given the early activity in financial futures, commodity trading and the concentration of economic releases, North American hours will unofficially begin at 12:00 p.m. GMT. With a wide gap between the close of US markets and the opening of Asian trade, the liquidity lull closes New York trading at 8 p.m. GMT at the end of the North American session.
The Asian / European sessions overlap, which sometimes creates more volatility due to increased trading activity during these hours. The figure below shows the rise in hourly intervals for various currency pairs at 7:00 GMT.
If the currency pair is a cross of currencies that are actively traded during Asian and European hours (such as EUR/JPY and GBP/JPY), it will be more responsive to Asia/European session overlap and the price increase will be less pronounced. Consistency of action sessions across Europe/USA. Of course, the risk of scheduled events for each currency will have a significant impact on activity, regardless of the respective sessions of the pair or its components.
A greater reaction to Asian / European session overlaps is shown in pairs that are actively traded in Asian and European hours. Image by Sabrina Jiang © 2020
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For long-term or fundamental traders, trying to set up a position during the pair’s most active hours can result in a poor entry price, a missed entry, or a trade that violates the rules of the strategy. Conversely, volatility is essential for short-term traders who do not hold positions overnight.
When trading currencies, a market participant must first determine whether high or low volatility will work best with their trading style. Trading during session overlap or periods of frequent economic releases may be a better option if more pronounced price action is desired. The next step will be to decide which hours are best to trade, taking into account the volatility bias. A trader must determine which timeframes are most active for their preferred trading pair.
Considering the EUR/USD pair, the European/U.S. cross session will find the most movement. There are usually alternatives to trading during this session, and a trader must balance the need for good market conditions with external factors such as physical well-being. If an American market participant chooses to trade the active hour for GBP/JPY, he must wake up early in the morning to follow the market.
If this person is not a professional trader, lack of sleep can lead to fatigue and errors in judgment. An alternative could be to trade in European / American hours. session overlap, where volatility remains high despite Japan’s markets being offline.
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That said, there are certain times that are better to trade than others, while you can focus on certain currencies or pairs.
Best Forex Trading Timings (hours)
You can see that between each Forex trading session there is a period where two sessions are open at the same time.
Example: In summer, London closes at 16:00 GMT and New York opens at 12:00 GMT. This means that there is a 4 hour period where these two sessions are open.
These are usually the busiest times of the trading day where you would expect to see more movement, and we love movement… movement is where the money is made!
The overlap between Tokyo and London is not always the most fluid, but there is only an hourly crossing in the summer and none at all in the winter.
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Tokyo has a longer overlap with other European sessions such as Frankfurt, but there is still no major movement.
We may see some big moves around this time, especially when news is released from the US and Canada, while there may also be late news from Europe.
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