| Forex Trading Sessions by Region and Market | |||
|---|---|---|---|
| Session | Major Market | Hours (GMT) | Hours (ET) |
| Asian Session | Tokyo | 12 a.m. to 9 a.m. | 7 p.m. to 4 a.m. |
| Sydney | 10 p.m. to 7 a.m. | 5 p.m. to 2 a.m. | |
| European Session | London | 8 a.m. to 5 p.m. | 3 a.m. to 12 p.m. |
| North American Session | New York | 1 p.m. to 10 p.m. | 8 a.m. to 5 p.m. |
Asian Forex Session (Tokyo)
When liquidity is restored to the FX market at the start of the week, the Asian markets are naturally the first to see action. Unofficially, activity from this part of the world is represented by the Tokyo capital markets and spans from midnight to 9 a.m. GMT.
Notable countries other than Japan also trade during this period, however. They include China, Australia, New Zealand, and Russia. Considering how scattered these markets are, it makes sense that the beginning of the Asian session starts before the standard Tokyo hours. Asian hours are often considered to run between 11 p.m. and 9 a.m. GMT.
European Forex Session (London)
The European session takes over to keep the currency market active just before the Asian trading hours come to a close. This FX region is very dense and includes a number of major financial markets. London takes the honors in defining the parameters for the European session.
Due to the presence of other capital markets (including Germany and France), this trading period can start before the official open in the U.K., while the end of the session is pushed back as volatility holds until after the close. But generally, European hours run from 8 a.m. to 5 p.m. GMT.
Depending on the degree of activity, trading sessions can start before and extend beyond set or official trading times.
North American Forex Session (New York)
The Asian markets have already been closed for a number of hours by the time the North American session comes online, but the day is only halfway through for European traders.
This session is dominated by activity in the U.S., with participation from Canada, Mexico, and countries in South America. As such, it comes as little surprise that activity in New York City represents the high volatility and participation rate for the session.
Taking into account the early activity in financial futures, commodity trading, and the concentration of economic releases, the North American hours may unofficially begin before their GMT start time. The considerable gap between the close of the U.S. markets and the opening of Asian trading can mean a lull in liquidity. This puts the close of New York trading at 10 p.m. GMT, as the North American session closes.
Effects of Overlapping Trading Sessions
The Asian/European sessions overlap, sometimes creating more volatility due to increased trading activity during those hours. The figure below shows the uptick in the hourly ranges in various currency pairs at 7 a.m. GMT.
Image by Sabrina Jiang © Investopedia 2020
If the currency pair is a cross made of currencies that are most actively traded during Asian and European hours (like EUR/JPY and GBP/JPY), there will be a greater response to the Asian/European session overlaps and a less dramatic increase in price action during the European/U.S. sessions’ concurrence.
Of course, the presence of scheduled event risk for each currency will still have a substantial influence on activity, regardless of the pair or its components’ respective sessions.
Image by Sabrina Jiang © Investopedia 2020
For long-term or fundamental traders, trying to establish a position during a pair’s most active hours could lead to a poor entry price, a missed entry, or a trade that counters strategy rules. In contrast, volatility is vital for short-term traders who do not hold a position overnight.
Impact on Trading Strategies
When trading currencies, a market participant must first determine whether high or low volatility works best with their trading style. Trading during session overlaps or typical economic data release times may offer profit opportunities if substantial price action is desired.
A trader will also need to determine what time frames are most active for their preferred trading pair. For example, for the EUR/USD pair, the European/U.S. session crossover will provide the most movement.
There are usually alternatives to trading in this session, and a trader should balance the need for favorable market conditions with outlying factors, such as physical well-being. If a market participant from the U.S. prefers to trade the active hours for GBP/JPY, they must wake up early in the morning to keep up with the market.
Is Greenwich Mean Time (GMT) Still the Standard for Time?
No, GMT is no longer the standard for worldwide time. Since 1972, the standard has been Universal Time Coordinated (UTC). While their times are the same, GMT actually is a time zone while UTC is a time standard.
Can I Trade FX on Weekends?
Not really. Though the forex market is available 24 hours a day during the week, it closes at about 5 p.m. on Fridays and reopens at 5 p.m. on Sundays.
Is There a Best Time to Trade Forex?
Although there’s no official one, many traders feel that 8 a.m.-12 p.m. ET holds great potential because of the overlap of the London and New York trading sessions. Substantial data is released in the U.S. in these hours, there are many participants, and the market experiences volatility and liquidity (especially for USD pairs).
The Bottom Line
Due to the three major forex trading sessions across the world, the forex market is essentially open for business 24 hours a day, five days a week. As a whole, it offers substantial potential for profitable trading.
However, that doesn’t necessarily mean you should monitor and take part in every session. If you’re not a professional trader, lack of sleep could lead to exhaustion and errors in judgment.
An alternative may be to trade during the hours that comprise the European/U.S. session overlap, where volatility is still elevated, even though Japanese markets are offline.
