The foreign exchange market operates 24/5— a well-loved forex feature. This around the clock operation allows traders and investors to speculate on the market, enter a trade, and potentially profit from it conveniently.
The four major trading sessions this market operation possible. During this window, individual and institutional investors buy and sell currency pairs to either generate profit, secure financial futures, and hedge risks.
Remember, volatility and liquidity vary during different trading sessions, and so do risk and profitable opportunities. Make sure you’re trading the forex session that fits your risk appetite and trading objectives.
This article walks you through the different forex trading sessions and their respective characteristics. Read on to see which session is best for you!
Around-The-Clock Operation of The Forex Market
With its convenient market hours, the forex market is one of the well-regarded financial markets by investors, traders, and speculators.
But what made this around-the-clock operation possible?
This is primarily because the financial centers in New Zealand, Japan, North America, and the United Kingdom are open to business. The operation of these centers essentially opens up their respective trading sessions as well.
Here are the four forex trading sessions, each with its respective local time and UTC.
| Trading Session | Local Time | Coordinated Universal Time (UTC) |
|---|---|---|
| Sydney Session | 7:00 AM – 4:00 PM AET | 9:00 PM – 6:00 AM |
| Tokyo Session | 9:00 AM – 6:00 PM JST | 12:00 AM – 9:00 AM |
| London Session | 8:00 AM – 5:00 PM GMT | 7:00 AM – 4:00 PM |
| New York Session | 8:00 AM – 5:00 PM EST | 1:00 PM – 10:00 PM |
These sessions open during legal business hours in their respective countries. So, assume you want to trade New York sessions. This means that you should be up during the local business hours of New York or North America.
Also, you’re essentially in the market with the institutional and central banks performing international forex transactions– so don’t expect that only individual traders will be in the market.
The same goes for other trading sessions, like Sydney, Tokyo, and London.
Understanding Forex 3-Session System
Traditionally, the forex market has a 3-session system, which includes Tokyo, London, and New York sessions. These are known to be the peak trading sessions in the market.
Here are the three main forex trading sessions and their characteristics.
Tokyo Forex Trading Session (Asia)
UTC: 9:00 PM – 6:00 AM
The Tokyo trading session is known as the session that kickstarts the forex trading week. Because of this, the Mondays of this trading session are infamous for surprising the market with changes because they carry over the unmonitored weekend market changes.
Fun fact: The Tokyo and Sydney forex trading sessions are also known as the Asian session. That is because major Asian financial centers operate during these trading periods. This includes the financial centers of South Korea, China, Singapore, and Hong Kong.
While the Tokyo trading session may be less volatile and have decreased liquidity, it’s important to remember that this doesn’t mean the market period is unprofitable.
Tokyo’s trading session offers a calm and reassuring environment, especially for beginner and cautious traders. During this period, the currency market is expected to adhere to its prevailing support and resistance during this session. So, it’s easier to time the market and position your trades for returns.
Ultimately, traders who trade the Tokyo session are free from any worry of exposing their investment to substantial market risks.
| Tokyo Session Characteristics |
|---|
| Minimal risk during non-Mondays |
| Thin Liquidity |
| Static market environment |
| Range opportunities and potential breakout trend at the end of the session |
| Ideal for beginner traders |
| Best to trade currency pairs with AUD, JPY, and NZD |
London Trading Session
UTC: 7:00 AM – 4:00 PM
When we talk about forex sessions, we consider the London session the trading capital of the forex market. Why?
It’s known for having a huge trading volume, with approximately 43% of daily forex activities being transacted during this market period.
As the forex clock strikes the London session, a massive influx of traders occurs. Thousands of retail forex traders, along with institutional traders and central banks, pour into the forex market to engage in forex trading. This surge in activity is what makes the London session the most volatile across all market periods.
But being named after London doesn’t mean all the forex transactions only come from London.
Major European financial centers are also open during this period. This includes the financial centers of Amsterdam, Edinburg, Frankfurt, Geneva, Hamburg, Luxembourg, and Zurich. That is the main reason why many forex traders and enthusiasts call this session the European session.
| London Session |
|---|
| Most significant volatility |
| Lower spreads because of increased market fluctuation |
| Breakout and reversal opportunities |
| Profitable for trading currency pairs with GBP, EUR, and CHF |
New York Trading Session (North America)
UTC: 1:00 PM – 10:00 PM
The New York session is the second most heavily traded session throughout the forex trading day.
Remember, the United States owns the USD, and the USD is considered gold in the currency market because of its stability and significant role in the forex market. With this, many traders and investors enter the forex market during the New York session to trade USD-denominated currency pairs.
Note: The first 4-hour of the New York session is considered the most profitable, volatile, and liquid market period because it overlaps with the London session.
News traders find the New York session to bring about big opportunities because most economic news releases are being published during this market period. Also, the US economy is known to be a major market mover, so any news release concerning the US economy is sure to make market noise.
| New York Session Characteristics |
|---|
| Highly volatile |
| Opportunities for news trading |
| Highest trading volume during the London and New York overlapping session |
| Trending market |
| Breakout and reversal opportunities |
| Ideal for scalpers and intraday traders |
| Profitable for trading major currency pairs (EUR/USD, GBP/USD, JPY/USD) |
What is Sydney Forex Trading Session?
UTC: 9:00 PM – 6:00 AM
The Sydney trading session is one of the main trading sessions in the forex market. This is the forex session that kickstarts the new forex week. When the other part of the world is still on a Sunday rest, the financial market of New Zealand is already geared up for another forex week.
Again, this market period starts the moment the financial market of New Zealand opens. Yes— it’s the New Zealand’s financial center and Australia’s. Don’t be confused!
With its time zone, you can expect the market to have thin liquidity and decreased trading volume because the traders from the West are on their bed and away from their trading device during this market period. Also, trading forex during this illiquid market may be costly because of high spread upon trade execution.
But why is the Sydney session not included in the Forex 3-Sessions System? Well, it’s because this session is often associated with the Tokyo session because they’re both called the Asian trading session.
Note: With the operation of the Sydney forex session, western traders can immediately speculate and enter the market on Sunday evening.
What is the Best Time to Trade?
Here’s the hack for forex traders:
The best time to trade forex is when the market is active. The moment the market is experiencing high trading volume activity from market participants, the market is likely to trend and fluctuate.
But when does the forex market experience a high volume of trading activities? You can expect the market to be volatile and have an increased in demand when these happen:
- The market’s historical data signals a clear buy or sell signal.
- There’s an economic news release concerning the currency in your pair
- Two forex trading sessions operate at the same time
Overlapping Forex Trading Sessions
As the name suggests, session overlap is when two major forex sessions are operating at the same time.
These overlapping periods are the busiest forex trading hours throughout the day. That is because the market participants from both trading sessions are in the forex market simultaneously, essentially increasing the trading volume, liquidity, and volatility.
To maximize the profitable opportunities presented during the overlapping session, you should familiarize yourself with the characteristics, risks, and opportunities of the overlapping sessions.
For your reference, here is the list of forex market sessions that overlap in forex and their respective time in UTC.
| Overlapping Sessions | UTC |
|---|---|
| Sydney-Tokyo | 12:00 AM to 6:00 AM |
| Tokyo-London | 7:00 AM to 9:00 AM |
| London-New York | 1:00 PM to 4:00 PM |
| New York-Sydney | 9:00 PM to 10:00 PM |
The overlapping of the London and New York sessions carries the most trading volume, resulting in thick liquidity and increased volatility.
Frequently Asked Questions
What Are the Trading Sessions Times in South Africa?
In South Africa, traders find the London session to be most profitable because it doesn’t only have high trading volume and thick liquidity, but South Africa’s daytime benefits from the London’s as they overlap with one another.
This makes the London session the most ideal forex trading period for South African traders.
What Is the Best Trading Session?
The best trading session should be based on your personal risk tolerance and investment objectives. While the London and New York sessions offer a great deal of volatility and market volume, these market periods may not be suitable for beginner and cautious traders because of increased risks due to fluctuating markets.
Meanwhile, the calm and static forex market hours during the Tokyo and Sydney sessions are surely not enough for scalpers who want to profit from the short-term market trends.
What Are the Best Days to Trade Forex?
The best day to trade forex is during the mid-week or on Tuesdays, Wednesdays, and Thursdays.
This is because Monday is deemed risky for online traders because of the weekend risks. For Friday, many traders are exiting their positions to lock in profit, so this day is considered risky because of the potential market reversals.
Why Master the Forex Trading Sessions?
The Sydney, Tokyo, London, and New York trading sessions made the 24/5 forex operation possible. This allows forex speculators, traders, and investors to easily participate in the forex market anytime they want. Remember, knowing the characteristics of each forex trading session is one way to effectively trade forex and profit from it.
Are you still looking for effective strategies and systems to ensure your profitability in the forex market? Be part of the TRU CommuniTrade and get first-hand insights, opinions, and advice from your fellow forex traders.
