Forex trading, the exchange of one currency for another, is a dynamic market with global participation, boasting a daily turnover exceeding $5 trillion. It operates 24 hours daily, segmented into distinct sessions: Asian, European, and North American.
Among these, the Asian session, also known as the Tokyo session, stands out as a period characterised by lower trading volumes and higher spreads, presenting unique challenges and opportunities for traders.
Let’s first take a closer look at the Asian session.
Tokyo Session’s Advantages
The Tokyo session, active from 8:00 a.m. to 6:00 p.m. local time, corresponds with the operational hours of Japanese banks. Thus, it is the onset of the Asian trading session.
It is worth mentioning that major economic hubs in Europe and North America remained dormant during this period. This led to subdued trading activity and reduced volatility.
Nevertheless, the absence of external influences results in clear support and resistance levels, facilitating more predictable entry and exit points for trades.
Despite its slower pace compared to other sessions, trading during the Tokyo session offers advantages. The lower volatility simplifies trade management and allows for more thorough market analysis.
Furthermore, the overlap between the Tokyo and London sessions towards the latter part of the Asian session injects liquidity into the market, creating optimal conditions for trading.
Best Asian Session Pairs
Determining the best time to trade Forex during the Tokyo session involves understanding the Japanese time zone, which operates on GMT+9 without daylight saving time. The peak liquidity periods typically coincide with session overlaps, particularly between the Sydney/Tokyo and Tokyo/London sessions.
During these overlaps, which occur from 23:00 to 7:00 GMT and 8:00 to 9:00 GMT, trading activity and volatility in the Tokyo session increase. This is attributed to simultaneous participation from multiple markets.
Traders seeking to capitalise on the Tokyo session should prioritise currency pairs suited to its characteristics—low volatility and higher spreads. These pairs offer better trading opportunities during this period, ensuring traders make informed decisions aligned with market conditions.
By leveraging knowledge of optimal trading times and suitable currency pairs, traders can maximise their potential for success in the Tokyo trading session.
USD/JPY, AUD/USD, NZD/JPY, AUD/JPY, and EUR/JPY stand out as prime candidates for trading during the Tokyo session. Despite the session’s reputation for low trading volume, liquidity, and volatility, these pairs offer lucrative opportunities. This is true for novice and experienced traders as they navigate the heightened fluctuations in the market.
However, many traders avoid the Tokyo session due to these challenging conditions.
London Session
It is important to gather more information about the London session regarding the best Asian session pairs.
The London session opens at 8:00 a.m. GMT (Greenwich Mean Time) and closes at 4:00 p.m. GMT, corresponding to 3:00 a.m. to 11:00 a.m. EST (Eastern Standard Time) during the winter months and 4:00 a.m. to 12:00 p.m. EDT (Eastern Daylight Time) during daylight saving time.
During this period,t financial institutions, hedge funds, corporations, and individual traders based in Europe conductmosty of their Forex transactions.
Characteristics:
- High liquidity: London is considered the Forex capital of the world, with a high concentration of banks, financial institutions, and traders. Consequently, the London session exhibits unparalleled liquidity, allowing traders to execute trades swiftly and at competitive prices.
- Volatility: The London session is known for its volatility, especially during the overlap with the Asian session in the early hours and the North American session later in the day. Major currency pairs often experience significant price movements during this time. This presents ample trading opportunities for both short-term and long-term traders.
- Key economic data releases: The London session coincides with the release of key economic data from the Eurozone and the United Kingdom, including GDP figures, inflation reports, employment data, and central bank announcements. These releases can significantly impact currency prices, increasing volatility and trading activity.
- Cross-session overlaps: One of the distinctive features of the London session is its overlap with other major trading sessions. The overlap with the Asian session provides an initial surge in trading activity. In contrast, the overlap with the North American session sustains momentum throughout the day, creating extended periods of liquidity and volatility.
Impact on Currency Pairs
During the London session, currency pairs involving the British Pound (GBP), Euro (EUR), and Swiss Franc (CHF) often experience heightened trading volume and volatility. Major pairs such as EUR/USD, GBP/USD, and USD/CHF are particularly active, attracting traders seeking opportunities in the Forex market.
Conclusion:
In summary, traders can unlock significant profit potential with knowledge of the best Asian session pairs. It’s crucial to emphasise that individual traders’ skills and strategies play a pivotal role in effectively navigating the nuances of the Tokyo session.
By carefully selecting these currency pairs and implementing sound trading techniques, traders can capitalise on the unique characteristics of the Tokyo session to achieve success in the Forex market.
Frequently Asked Questions (FAQs):
Here are some of the frequently asked questions about Asian session pairs:
1. What Currencies Are Under the Asian Session?
The Asian session primarily involves currencies from the Asia-Pacific region. Major currencies in this session include the Japanese Yen (JPY), Australian Dollar (AUD), New Zealand Dollar (NZD), and the Chinese Yuan (CNY)
2. What Pairs Move Most During the Asian Session?
During the Asian session, currency pairs involving the Japanese Yen (JPY) tend to experience higher volatility. Examples include USD/JPY, EUR/JPY, and AUD/JPY.
3. What is the Best Market to Trade During the Asian Session?
The best market to trade during the Asian session depends on your trading strategy and preferences. The Japanese Yen pairs, such as USD/JPY and EUR/JPY, are commonly traded, but it’s essential to align your trading approach with the characteristics of the specific currency pairs.
4. Is GBP JPY a Good Pair to Trade?
Whether GBP/JPY is a good pair to trade depends on your risk tolerance, trading strategy, and experience. GBP/JPY can be a volatile pair. Its movements are influenced by factors affecting both the British Pound and the Japanese Yen. Traders should thoroughly analyse and consider the associated risks before trading this pair.
5. Who are the Two Main Market Participants During the Asian Session?
Japanese institutional investors and Export-oriented businesses in Asia. Japanese banks and financial institutions are active participants in the Asian session and contribute to the liquidity of the Japanese Yen. Moreover, Companies engaged in international trade, especially those in export-oriented economies like Japan and China, often conduct transactions during the Asian session.
