Japan’s capital Tokyo, is the most majorly traded market in the Asian continent. That is, in Asia, the highest volume comes from the Tokyo market. In fact, it is considered the financial capital of Asia. Moreover, it is the third-largest trading center in the world.
The Tokyo session, also referred to as the Asia session, opens at 8:00 PM EST and is traded until 5:00 AM EST. In terms of Japan’s local time, the trading happens between 9:00 AM to 6:00 PM. As ‘Yen’ is the currency of Japan, 16.50% of all the Yen transactions take place during this time. And as far as all currency transactions are concerned, the value lies at 21%.
The one that matters the most during any session is the pip movement in different pairs. Below is a table which represents the average pip movement for some of the major currency pair.
Now, the average of the above currency pairs turns out to be around 53 pips. This number is less when compared to the New York session and the London session.
Some facts about trading the Tokyo session
During this session, the market is seen to fade away its momentum. That is, the market is seen to be quite flat. In technical terms, the market usually goes through a consolidation state. This session might not be the ideal session for the ones looking for large pip movement. However, this session can be great for scalpers.
Tokyo market typically is known to correct the overbuying and selling in the New York session. The market makes drastic moves during the NY session and comes to slows down its pace during the Tokyo session. Therefore, the liquidity during this session is quite feeble.
It is not just the central banks and hedge funds that move the market. Since Japan is the largest exporter in the world, a large number of transactions come from the exporters as well.
Also, the Bank of Japan is an active participant in the forex market during the Tokyo session. This is because it intervenes the curb appreciation in the Yen regularly.
Which currency pairs should you focus on?
The market conditions and situations tend to change from time to time, so it becomes uncertain to predict the exact movement of pairs. However, if we were to consider the average rates, we can keep an eye on the news from countries like Australia, New Zealand, China, and Japan. The news from these countries comes during the Tokyo session or just before its open. And the news usually pumps up the volatility and liquidity of the market. Hence, one can have a focus on AUD, NZD, and JPY pairs.
When the Tokyo session comes to an end, the London markets open, which causes overlap between the two sessions. So, to be part of the significant movements, keep an eye on GBP, EUR, and CHF along with AUD, NZD, JPY, and USD.
This is a brief review of the Tokyo session. We shall discuss the other sessions as well in the upcoming lessons. Take the below quiz to know if you have learned the concepts right.