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Forex Trading Sessions for Dummies

Started by Admin, Jun 21, 2024, 11:15 AM

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Topic keywords [SEO] Forex


Trading is a time-consuming activity and depending on the strategies used, it can require a lot of concentration. Not everyone can trade all day, and many traders only have time to devote to it for a few hours before or after work. Therefore, the choice of trading session is just as important as the assets you choose. In this article, you will learn about the different trading sessions based on the opening hours of the major financial centers and the assets that are best to trade during these periods.

Asian Session (Tokyo)

Europeans end the weekend on Sunday evening, just hours before the Tokyo Stock Exchange opens at 9.00am local time. By the time the Japanese wake up, it will be 2 a.m. in Paris or Berlin, or 3 a.m. in the winter given the time difference. Therefore, it will be difficult for a European employee to trade on the opening of the Nikkei (one of Japan's most important stock indices) on Monday morning.

After New York, Tokyo is the world's second financial center by market cap. The Tokyo Stock Exchange is open from 9 a.m. to 12:30 p.m. and at 3 p.m. (the time difference with Paris is 7 hours in summer and 8 hours in winter).

The Asian trading session is characterized by quieter trading activity, but can experience periods of high volatility, especially in connection with the publication of economic news or special events. Many other quite influential countries are present in this session, including China, Australia, New Zealand and Russia. When you consider the distance between all of these markets, it is easy to see why the opening and closing of the Asian session falls outside of the Japanese schedule. Instead, the Asian market typically runs from 11 p.m. to 8 a.m. GMT to match the trading hours of these markets.

Which assets should be favored during the Asian trading session?

Although currencies, cryptocurrencies and some indices (via futures contracts or Turbo24) can be traded 24 hours a day, a trader will find more opportunities in the Asian markets. Therefore, he can focus on the yen, the Australian or New Zealand dollar, the Hong Kong or Singapore dollars, the Chinese yuan. But be careful: even Asian currencies are sometimes more liquid during the London session than during the Asian session. Nevertheless, announcements and economic indicators that can cause volatility will be released during local hours.

During the Asian session, there is high volume and volatility in cryptocurrencies, especially since South Korea and Hong Kong are among the largest centers of crypto assets. Among the most volatile cryptocurrencies during the Asian session, we highlighted Comtech Gold (CGO), Renzo (REZ), Cypherium (CPH), Observer (OBSR). Be careful as these are cryptocurrencies with little market capital. Bitcoin and Ethereum are also prone to volatility spikes during the Asian trading session.

So, when it comes to stock indices, it is obvious that the Nikkei (JP225) comes first for traders. However, you can also trade the HK 50 index (Hong Kong), CSI 300 (Shanghai and Shenzhen index) or the Australian index (AU50).

European Session (London)

The European session, which is usually based on the London schedule, also includes the Paris, Zurich and Frankfurt schedules. The session opens slightly later in the trading day, just before the Asian stock market closes, and the European sessions alternate with the CAC 40, Footsie and DAX 40 opening. The official opening hours of the London session are from 7.30 a.m. to 3.30 p.m. GMT. However, the effective trading period is extended by the presence of other markets, notably Germany and France, before the official UK opening.

Which assets should be favored during the European trading session?

During the European session, all currencies are in the spotlight. London is the capital of Forex, so it is during the European session that we find the most liquidity and opportunities to trade currencies. Therefore, traders will be able to pay attention to GBP/USD, EUR/USD and USD/CHF pairs in particular. As for indices, the DAX 40, Footsie, CAC 40 and Eurostoxx50 indices will receive the most attention. The Swiss index (SMI50) is also one of the most important indices, ahead of the Italian and Spanish indices.

Switzerland is considered Europe's Silicon Valley of blockchain, so this session will also find plenty of opportunities for cryptocurrency trading. And London is one of the world's largest gold markets (LBMA - London Bullion Market), so this is a great trading session for speculating with the precious metal.

American Session (New York)

Although the sessions between Asia and Europe and then between Europe and the US overlap, by the time the Americans get to the market, the Asian exchanges are already closed for several hours. The session in the Americas is dominated by activity in the United States with some participation from Canada, Mexico and a few South American countries.

For this reason, it is not surprising that activity in New York represents the peak in volatility and trading volumes. Given the earlier beginning of the futures and commodities markets and the release of economic statistics, the U.S. session unofficially begins at noon GMT.

Due to the significant gap between the closing of the U.S. markets and the opening of the Asian session, the sudden drying up of liquidity marks the end of the U.S. session in FX and 24-hour markets at 20:00 GMT.

Which assets should be favored during the U.S. trading session?

The dominant market during the US trading session is the equity market, as Wall Street sees the highest trading volumes in equities. Therefore, there are opportunities for traders to utilize the S&P 500, Dow Jones and Nasdaq. During the U.S. session, the U.S. markets dominate and European indices often follow their U.S. counterparts.

The US is also the financial center for the CME (commodities market) and the CBOE (options market). For currencies, the U.S. session is by far the busiest after the European session. Therefore, traders specializing in options will be active mainly during the American session. Although there are European options trading centers (Eurex), they are highly inferior to the American ones.

Since commodity futures are traded mainly on the CME, the American session is also highly volatile and liquid. This time is ideal for trading WTI (U.S. crude oil), corn, and even other commodities like beef or orange juice. Depending on what you can afford, you will have to adapt your trading hours to the commodities you want to trade, or adapt your chosen assets to your capabilities.

Thus, each Forex trading session is different in its own way. In order to trade effectively, a trader will have to adapt not only to the different schedules, but also to the list of the most popular products for each individual session. The choice of Asian, American or European session will depend not only on your personal schedule, but also on your preferences and opportunities.