Forex Trading Sessions – Forex Academy

FWhile the forex market offers the opportunity to trade 24 hours per day, smart traders know that certain times just aren’t prime for trading. Professionals make the most of their time by trading during the best market sessions, then they choose to sleep and take care of other matters during lame market sessions or other special times when the market just isn’t ideal for trading. So, which times are best for forex trading and when should you avoid trading altogether? Stay with us to find out.

The Best Times to Trade

The major time zones dominate the forex market: Asia, Europe, and the United States. When time zones overlap, it creates one of the best market environments for forex traders. Overlapping time zones occur:

In the New York and London sessions (12 pm GMT – 5 pm GMT)
In the London and Asia sessions (8 am – 9 am GMT)

If you trade during these times, you can take advantage of the market’s high liquidity, volatility, and the best price action. Trading can also pick up on certain days and lag on others. On Mondays, after the overlapping of the New York and London sessions, things tend to pick up and the market reaches its peak mid-week, around Wednesday, before slowing back down in time for the weekend.

The Worst Times to Trade

If you feel like you need to trade as much as possible to be productive, you’ll be happy to know that there are times when the market should simply be avoided.

Certain weekdays: To be specific, Monday mornings start off slow, before picking up after the New York and London sessions overlap. It’s a good idea to start trading around this time, rather than first thing Monday morning. After the market reaches its peak mid-week, it also tends to slow down around Thursday and Friday, causing many traders to finish up for the week before the London sessions ends on Friday.
Weekends: The market is incredibly slow on weekends for pretty obvious reasons, as most traders take some time off on Saturday and Sunday. If you can’t stand to sit around all weekend, you could use the time to check news data and check other factors that might affect the market in the following week.
When major news releases are expected: You can use an economic calendar to keep an eye out for major news releases. These events can cause the market to become extremely unpredictable, which causes many traders to simply avoid trading altogether during these times. These events often include financial reports, economic data, political updates, etc. Keep in mind that some of these events will have a bigger impact on the market than others.
During certain holidays: Just like with weekends, most forex traders take certain holidays off from trading, therefore, the market slows down, and there just isn’t much action. Christmas is one of the main holidays where traders are not working, alongside New Year’s Eve and day, and certain holidays during the summer, like Independence Day, Memorial Day, Labor Day, and so on.

Summary

All trading sessions were not created equally, and savvy traders know when NOT to trade. The market is best for trading when certain sessions overlap and from Monday afternoon through the middle of the week. It’s a good idea to close out positions on Fridays and to refrain from opening any new positions until after the weekend has passed. You should also avoid the market if major news releases are expected to hit and during big holidays, like Christmas, summer holidays, and New Year’s.

The forex markets are a 24-hour business (Sunday to Friday), but people need to sleep, so how does it stay open 24 hours a day? Well, there are four different trading sessions based on different continents that relate to their timezone. So while London sleeps, Tokyo will be running.

The four trading sessions as the Asian session (which is both Sydney and Tokyo), the London session, and the New York session. Let’s get a little more information about each one.

The Asian Session

The Asian session runs from 22:00 GMT to 08:00 GMT, it is made up of both the Sydney markets and the Tokyo markets.

The most traded currency during this session is unsurprisingly the Yen which makes up around 16.5% of the transactions during this session.
Approximately 21% of all forex transactions occur during this trading session.
The liquidity during this session is often lower than in the other three sessions.
It is far more likely for a currency pair to range during this market rather than to go on a trending movement.
Most of the activity will occur at the start of the session as this is when most of the economic news is announced.
The most movement will be with the JPY, AUD and NZD pairs as the economic news events for these currencies occur during this session.

The London Session

The London session runs from between 08:00 GMT and 16:00 GMT, this has a slight cross over with the New York Session between 13:00 GMT and 16:00 GMT. the Londo session is considered to be the major market session and often attracts the most interest as the key financial center for Europe.

The session has a huge trading volume with over 32% of all trading transactions occurring during the London session.
There is a large amount of liquidity.
This is the session with the most uptrends and downtrends.
Spreads are often very low during this session.
The volatility can sometimes slow down in the middle of the London session due to London traders being off for lunch, this remains until the New York Session starts up at 13:00.
Market trends can sometimes reverse at the end of the session due to European traders locking in their profits.

The New York Session

The New York session runs from 13:00 GMT to 21:00 GMT, this has a slight cross over with the London session between 13:00 GMT and 16:00 GMT.

There is a rough estimation that about 19% of all forex transactions occur during this session.
There is a lot of market-moving potential during this session as 85% of all trades involve the US dollar.
There are high liquidity levels at the start as it overlaps the London session.
Most of the economic news events are released towards the beginning of this session.
Liquidity and volatility often decrease as the session goes on.
There is often little movement on Friday afternoon and a high chance for trend reversals in the second half of the day.

So that is a little overview of the three (four if you could Asia as two) trading sessions that keep the forex trading world running 24/7. The session that you should trade in depends on the pairs that you wish to trade, but we would suggest sticking to ones that don’t keep you up in the middle of the night.