The trading session is a period of carrying out of transactions between market participants from the same time zone.
It is very important to consider the time of a day while trading, at different times, different currency pairs are liquid, the volatility is different as well and trading style changes from calm to aggressive.
Why Forex trading is avaliable around the clock?
The Forex market is available 24 hours a day. This is due to the fact that banks and merchants are working in different time zones, so that when in one end of the planet trading is closing, in the other – traders are just kicking into action.
The Forex market never sleeps, except weekends and holidays. After a break at the weekend, there is a sharp change in prices. It is possible to predict its direction while analyzing the news on Friday and at the weekend. Although the time before the market closing and then opening on Monday is considered to be the riskiest and the most unpredictable due to price gaps. There is even such a term as the trading on gaps.
In some periods of the day sessions are overlaid on one another and trading becomes more active.
Forex trading hours
There are such trading sessions on Forex:
- Pacific 20:00 – 07:00 UTC;
- Asian 23:00 – 09:00 UTC;
- European 7:00 – 17:00 UTC;
- American 13:00 – 23:00 UTC.
Exchanges work schedule is defined by the UTC time – Coordinated Universal Time (world time), which determines the time of all time zones.
Some may ask: where is the usual GMT?
We will not go into details, but in short: GMT is a Greenwich time that is determined by the daily movement of the stars. A UTC time is determined by the atomic clock. So, the astronomical time trails atomic by nearly the whole 1 second! Scientists have decided that life can’t be such anymore and took UTC for the official measure of time in the world. But in fact, GMT and UTC are synonyms.
The time in UTC is not being adjusted in the winter and in the summer, so in those places where clocks are adjusted for summer time, time is changing towards UTC.
Trading sessions features
- Australia (Australian Dollar AUD). Sydney Stock Exchange.
- New Zealand (New Zealand Dollar NZD). Wellington Market.
It opens market after the weekend and its name speaks for itself. This is the quiet time on the market, trading “calm”. Activity on the market is created by stock exchanges, banks of New Zealand and Australia. Due to the small volume of financial flows, this session is often attached to the Asian one.
Pairs with AUD are enough liquid, take active participation in trading, especially when there is the imposition of the Asian session.
The beginning of the trading day is considered to be the opening of the Asian session.
- Japan (Yen JPY). Tokyo Stock Exchange – the financial center of Asia, one of the world’s leading financial centers. Export companies and central banks are trading. Japan is the third largest currency trading by volume.
- China (Yuan CNY). Hong Kong Stock Exchange, Shanghai Stock Exchange. China is an economic superb country and news from this country have a serious impact on the market.
- Singapore is a financial hot spot.
The share of the Asian session from the total transactions in the currency market is 21%.
During the Asian session trading is calm. Majors liquidity is low. This session “heats” traders and affects their decisions in the next European session. For example, the EUR/USD pair made a breakthrough during the Asian session, so the movement is likely to continue during the European session.
The economies of Japan and China are export-oriented, so a large number of trading companies buy and sell currencies. Consequently, the trading volume is impressive.
The Japanese Yen is among the three most traded currencies on the Forex, covering 16.5% of all market transactions.
The largest price activity will be observed in the AUD and pairs with JPY after the release of economic news from China.
Volatility during Asian session:
The European Session
- Britain (British Pound Sterling GBP). London Stock Exchange is the world trade center, where 30% of all forex transactions take place.
- Switzerland (Swiss Franc CHF). Zurich Stock Exchange is one of the largest European trading platforms. The Swiss economy is the most stable in the world.
- Germany (Euro EUR). Frankfurt Stock Exchange is one of the world’s largest stock exchange, Germany is a leader in terms of GDP.
- France (Euro EUR). Paris Bourse is the largest exchange in Europe. According to the total volume of the economy, France is the second in the European Union (after Germany).
Most price trends start with the trading session in London and usually continue until the beginning of the American trading session.
The European session overlaps with two other sessions. Therefore trading is rapid, the volatility and liquidity of pairs are high. By the middle of the day transactions are executed less active. But in the afternoon the American session is overlaid and the activity increases again.
The European session, especially during overlaying hours, is for traders who prefer the adrenaline.
You can trade with the following pairs:
- majors: EUR/USD, USD/CAD, GBP/USD, USD/JPY and USD/CHF – the average volatility range is more than 80 points for all these pairs. High volatility provides a good opportunity to enter the market;
- crosses: NZD/USD, AUD/USD, EUR/CHF and AUD/JPY – they are less risky. You can trade based on fundamental economic factors.
Volatility during European session:
The American session
- United States (US Dollar USD). New York and Chicago Stock Exchanges. New York is one of the world’s major financial centers, the New York Stock Exchange is 19% of the total turnover on the Forex market.
- Canada (Canadian Dollar CAD). Toronto Stock Exchange.
The most important news, fundamental data and events take place during this trading session, which leads to high liquidity on the market.
In the first half of the day trading is more active, as the European session overlaps. Americans are speculating aggressively, the trend is moving in an unpredictable direction, making futile attempts to focus on the news.
After lunch and before the trading opening in Japan, the number of transactions and the pairs volatility falls below that favors dubious operations of major players of the New York Stock Exchange.
During the overlap of the American and European session, one can trade any currency pair, as liquidity is very high. It is better to trade majors and crosses, exotic pairs are not popular.
On Friday evening, US traders prefer to fix profits before the weekend and major trends can observe a pullback.
American session volatility:
Services, widgets, applications for monitoring trading sessions
There are various services and applications to keep track of the trading sessions. They help traders to get the lay of the land the situation and optimize the transactions due to the market situation.
For example, there is a widget on our website that shows which exchanges are operating at the moment, time of the opening and closing of the rest ones.
In order not to bother with the calculations and always be aware of what is happening on the stock exchange, install the application of exchange hours on your phone. Just type in the search of Google Play or App Store. Here are the most popular ones:
In App Store:
In Google Play:
There are also special helpers for a trading platform. You can download a free indicator for MetaTrader 4 – trading hours indicators.
The indicator of trading sessions shows the start and end of the three trading sessions: Asian, European and American.
Sessions are displayed by background rectangles. The length of the rectangle corresponds to the duration of the trading session, and height – to the trading range. For the current trading day, there is an opportunity to show the extreme prices of each session.
A crib-infographics for the trader
In order not to get lost in the maelstrom of information on the trading sessions, we have created a cheat sheet in a form of infographics, which contains working hours and liquid currency pairs for each session.
How to start trade on Forex read here.