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Learning the Tools/Chapter 5

Different sessions of trading

 

We all know the importance of perfect timing, Forex treasure hunters. After the lesson we are following up, you will understand that unless dug at the perfect time, even the best treasure excavation may go wrong. 
 
It all depends on the Timing!

Forex market is one of the most attractive financial markets in the world as it runs 24 hours a day 5 days a week which opens huge trading possibilities for investors, allowing them to place orders all the day long and even at nights. Nevertheless, there are particular hours when the price action is the strongest or weakest. Furthermore, volatility of different currency pairs varies during the trading day, that’s why the result of your trading may greatly depend on the time when you trade. 
 
There are a few major sessions in the world when most of the activity happens. It is always best to keep a note of them and trade as per their timings. After all, you are not going to earn much when there isn't any activity in the market.
 
 
Asian Session
 
• The session starts at 00:00 a.m. GMT and finishes at 08:00 a.m. GMT.
• Financial centres of the Asian session include: Tokyo, Singapore and Hong Kong 
• More than 20% of transactions take place during this time.
• During Asian session the major news releases come from New Zealand, Japan, Australia and China thus the Asia-pacific pairs which include AUD, NZD and JPY are the most active. 
• Japanese Yen is the 3rd most traded currency, involved in about 16.5 % of all Forex transactions.
 
European Session
 
• The session starts at 08:00 a.m. GMT and finishes at 05:00 p.m. GMT. 
• Financial centres of the European session include: Frankfurt, Zürich, Paris, London. London has always been considered as the Forex capital of the World.
• Around 30% of the global transactions occur during the European session.
• It clashes with both the Asian and the American sessions, thus it’s basically one of the most volatile trading sessions with high liquidity and lower pip spreads. 
• Due to the high volatility, you can practically trade any pair but it is best advised to stick with the majors. 
• During European session the major news releases come from Europe thus EUR, GBP and CHF are all the most actively used currencies. 
 
American Session
 
• The session starts at 01:00 p.m. GMT and finishes at 10:00 p.m. GMT. 
• Financial centres of the American session include: New York and Chicago. 
• During the initial hours, it overlaps with the European session, hence a big liquidity for that period.
• The majority of economic news are published around the beginning of the American trading session as both London and New York sessions are open at this time. 
• Since the Dollar is on 85% of all transactions, it presents an ideal time to trade. 
• American session is considered to be the most aggressive in trading. 
 
Pacific session
 
• The session starts at 10:00 p.m. GMT and finishes at 06:00 a.m. GMT. 
• Financial centres of the Pacific session include: Wellington and Sydney. 
• Pacific session is one of the most quiet sessions for Forex trading. 
• Majority of traders focus on the currencies, like AUD, NZD, USD during these hours. 
 

 

And now a few important tips on Forex trading sessions: 
 
  • It’s better not to leave the trades without attention during so-called "thin" market - the market with a low number of buyers and sellers. It occurs during the transition time between sessions when liquidity is not enough to keep prices stable, thus some strong movements are possible. A “thin” market has high price volatility and low liquidity. 
  • During the official holidays the major banks, stock exchanges and companies withdraw funds for reporting periods. This is a long "thin" market, where you need to extremely cautious. 
  • Quite often there is a gap between closing prices on Friday and opening prices on Monday, thus we recommend to protect your trades by placing stop-losses or closing the trades on Friday itself. 
  • Even the perfect trading strategy may fall apart if you apply it at a wrong session. If the long-term or fundamental traders try to place an order during the most active hours, it may lead to a poor entry price or a missed entry. At the same time volatility is vital for the short-term traders who generally don’t hold their positions overnight. 
 
And finally we came to the most interesting point! Would you like to know what is the best time for trading in Forex? Here you are: 
 
The overlap between the London and the New-York sessions can be considered as one of the best times to trade considering the liquidity and the high currency pair combinations allowed. 
 
That’s pretty much it, fellow camper! Check out the next lesson to be one more step closer to your dream of becoming a Forex treasure hunter!