Forex Market Hours: The secrets of the first hour

The forex market operates 24 hours a day, encompassing trading sessions across all continents. This characteristic makes it immensely popular among major traders since it allows them to engage in trading throughout the weekdays. However, there’s a caveat: not all currency pairs remain consistently active or present favorable trading opportunities throughout the entire day.

Market volatility varies depending on the currency and the regional location, opening and closing hours of stock exchanges. In this article, we will delve into the four major market sessions along with their subparts to determine the optimal times for trading different currency pairs and timing trades for superior results.

Different Forex Sessions: Optimal Trading Times

Forex sessions correspond to the timing when major stock exchanges open and operate. During these market hours, the highest volume of money transactions takes place, leading to increased volatility for the specific currency being traded.

For instance, during the Tokyo session, Japanese traders predominantly transact in Japanese Yen, thereby amplifying trading volume and indicating heightened volatility for JPY or Japanese Yen.

The foreign exchange market comprises four major market hours that are widely recognized:

• Sydney Session.
• Tokyo Session.
• London Session.
• New York Session.

The Sydney Session aligns with the opening of the Australian stock market. The Tokyo Session corresponds to the commencement of Japanese stock exchanges. The London Session coincides with the opening of the UK stock market, while the New York Session kicks off with the initiation of the US stock market.

Of these sessions, the London Session stands out as the most pivotal. A significant portion of forex transactions occurs during the London session. Many traders focus on London breakouts during this time. Additionally, daily highs and lows frequently take shape within this session, a concept we will elucidate further.

Another critical aspect highlighting the importance of forex market hours is the release of major news during this timeframe.

Strategy: The Crucial First Hour

The opening hour of each session in the forex market holds paramount importance. A substantial number of intraday tops and bottoms manifest around these timings. Therefore, pinpointing an opportune sweet spot can lead to profitable outcomes with reduced risk.

The chart below illustrates the intraday price structure of the EURAUD 5-minute chart over the last four trading days:

• Blue: Sydney session
• Yellow: Tokyo session
• Green: London session
• Red: New York session

In this chart, we’ve identified intraday tops and bottoms, along with breakout and correction points during the first hour of these sessions.

Example 1:

Let’s delve into another example involving GBPJPY (Pound versus Yen):

Observe that during the commencement of the London session, the market established a day’s peak. Similarly, note that trade volume surged at the start of the US session.

This observation underscores the high level of accuracy exhibited by this approach. It operates clockwise around 80% of the time.

Backtest

Furthermore, we conducted a backtest using data spanning 5800+ days from 1999 to 2018, focusing on GBPUSD Day High & Low timing. The test results indicate an average and median timing for Highs and Lows around 11:00, 11:30, 12:00, and 12:30 with GMT+3—essentially coinciding with the timing of the London session.

Nonetheless, this doesn’t imply that this approach will yield uniform results across all days and currency pairs. Some days witness GBPUSD performing strongly during the London session, while on other days, it remains flat. Similarly, USDCAD might perform favorably during the US session alongside news releases on some days, whereas it might exhibit a range-bound or fluctuating behavior on others.

Hence, it’s imperative to consult the daily news release schedule to determine which currency is likely to exhibit activity during your selected session. Subsequently, plan your trades accordingly.

Indicators used in this strategy for demonstration:

Otherwise, you can use our online forex market hour tool, which automatically converts forex market sessions into your local time zone.

Closing Thoughts:

For day traders, a forex session is a very essential factor. Whereas position traders hold their trade for more than 2-3 days, sessional timing is minor. They mostly are concerned with pricing & the direction where their trade is heading. Unlike for day traders, the timing factor is crucial, as trade ends within the same day. Therefore, understanding how each session works, one should study the price pattern, during those major sessional opening hours.

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