Forex market is 24 hours market, covering all continent’s trading sessions. For this particular reason, it is widely popular among major traders, because it enables them to trade anytime during weekdays. But there is a catch, not all currency pairs stay active or provide a good trading opportunity throughout the day. Market volatility varies currency to currency & with stock exchange regional location, opening hour & closing hour. Therefore below we will cover 4 major market session & also its subparts to understand, what is the right time to trade different currency pairs or timing trade for better results.
What are Different Forex Sessions?
Forex session is the timing when the major stock exchange opens & operates. During those market hours, the maximum money transactions take place, thus volatility increases for that specific currency. For example, in the time of the Tokyo session, most of the trader make the transaction with the Japanese Yen as the currency. Thus, JPY or Japanese Yen trade volume increases indicating higher volatility.
There are 4 Majors market hours in foreign exchange as we all know,
Major Forex Market Hours:
- Sydney Session.
- Tokyo Session.
- London Session.
- New York Session.
Sydney Session is when the Australian stock market opens. Tokyo Session is when Japanese Stock exchanges open. London Session is when UK Stock Market Opens, lastly New York Session is when the US stock market opens. Among these 4 sessions, London Session is the most vital one, maximum forex transaction takes place during the London session. There are lots of traders who trade London breakout during this session. Not to mention, daily highs & lows get formed during this session too. We will explain that later on.
Another reason why forex market hour is important because all the major news get released during these timing.
There is also a subpart of these sessions, for example, European session can be divided into Frankfurt session & London session. US session can be divided into New York session & Chicago session. These sessions are also moderately bear importance. Mostly for correction & re-entry.
How To Trade with Forex Market Hours:
The first hour of each session is very important. Most of the intraday tops & bottoms forms around those timing so if you pick a good sweet spot, then you can earn a profit with less risk.
Above picture is showing the last 4 trading days with whole intraday price structure of EURAUD 5 minutes chart.
In this chart,
- blue = Sydney session
- yellow = Tokyo session
- green = London session
- red = Newyork session
We have marked, the intraday tops & bottoms, also the breakout & correction points, during the first hour of these sessions.
Another one example with GBPJPY (Pound vs Yen):
See, during the start of the London session market created day top, the same way notice the start of the US session, trade volume also increased.
Now we can see how accurate is it. At least 80% of the time, it works clockwise.
Moreover, we did a test with 5800+ days of data from 1999 to 2018 on GBPUSD Day High & Low timing, test results show average & median of High Low timing around 11:00,11:30,12:00,12:30 with GMT+3, which is basically the timing of London session.
But it does not mean that for all days, for all currency pairs, it will work the same. Someday GBPUSD performs well during London session, someday it doesn’t, stays flat. For someday, USDCAD is good during US session with the news release, someday it’s in a range or under fluctuating moves.
For this reason, you need to check daily news release schedule & find out which currency will be active during your selected session & plan your trade accordingly.
Indicator 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.
For day traders, forex session is a very essential factor. Whereas position traders who 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, 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.