The forex market is a global market that is traded round the clock from Monday to Friday. The market although traded all-day varies in volume traded as the day progresses, following constant daily cycles. This is what forms the basis of forex trading sessions.
The disparity in trading volume is due to the difference in sleep-wake cycles in the different regions of the world. One of the major market players are the banks which operate during the normal business hours of the region in which they are in. Other players which are responsible for high trading volume partly restricted to the business hours are the institutional investors.
Across the world, different regions have different impacts on the forex market due to the volumes of orders executed in such regions. The four major forex trading sessions exist based on different world regions – London, New York, Tokyo, and Sydney. These sessions can also be referred to by their continents since there are similarities in the time zones of the countries.
The Forex Sessions
The Major Sessions
London is the largest trading session, in which the most volume is traded and forex pairs see the most volatility. This session can also be referred to as the European session. The currencies with the most volume traded in this session is the British Pound (GBP) and the Euro (EUR).
It is followed by the New York session. The New York session represents the North American session. This session sees the second-largest volume globally. The currencies that are most traded in this session are the United States Dollar (USD) and the Canadian Dollar (CAD).
The third largest session is the Tokyo session. It is also largely referred to as the Asian session although there are other minor centers in Asia. The currency seeing the most volatility is the Japanese Yen (JPY).
The fourth largest session in the world is that of Sydney in Australia. The most traded currencies during this session are the Australian Dollar (AUD) and the New Zealand Dollar (NZD).
The Minor Sessions
There are other regions where the forex trading volume is large enough to be recognized on the global radar but are not quite as large as the major sessions. These sessions are:
- The Frankfurt session,
- The Hong Kong session, and
- The Singapore session.
Forex Trading Sessions Relationships
Just as time changes across the world by the rotation of the earth, so do the forex sessions open and close. These sessions open between 6 am and 9 am local time, and close between 4 pm and 6 pm local time.
Although there is a change in volume with respect to different currencies (and pairs by consequence), there is even more volume/volatility when these trading sessions overlap.
Across the globe trading starts in Sydney, at 2200 hours GMT and it lasts till 0700 hours the next day. Following is the Tokyo session which starts at 2400 hours, 2 hours after the Sydney session, and runs until 0900 hours GMT.
The London session is next and starts at 0800 hours and is open until 1700 hours GMT. The last session to open is the New York Session which starts at 1300 hours and ends by 2200 hours GMT.
Forex trading sessions overlaps as they open and close. The session overlaps are as follows:
- The Sydney-Tokyo overlap – This overlap is the largest. It lasts for 7 hours from 2400 at the start of the Tokyo session to 0600 hours at the end of the Sydney session.
- The Tokyo-London Overlap – This overlap is the shortest that only lasts for an hour this is between 0800 hours and 0900 hours GMT.
- The London-New York Overlap – This is the heaviest overlap and it lasts for four hours. This is from 1300 hours at the start of the New York session to 1700 hours at the end of the London session.
- The New York and the Sydney sessions do not overlap.
Below is a table that shows the opening and closing time of the major forex sessions.
|Forex Session||Local Time||GMT|
|Sydney||0700 – 1600||2200 – 0700|
|Tokyo||0900 – 1800||2400 – 0900|
|London||0800 – 1600||0800 – 1700|
|New York||0800 – 1700||1300 – 2200|
Daylight Savings Time (DST)
These trading hours vary during the implementation of depending on the part of the world you are in. You should also get to know the differences in trading schedule from your broker as regards DST.
Currency Pair Volatility By Trading Session
Depending on the composition of the pair different pairs see varying volatility across the forex sessions. However, it should be noted that during the London session being the largest in the world, just about all the pairs experience an increase in trading volume.
In forex, the most volatile hours of trading are those which contain the overlap of the London and New York sessions, the two largest sessions.
That being said, the table below shows the pairs that get the more attention as the forex sessions open and close.
|Forex Session/Overlap||Forex Pairs Traded Preferentially (Majors and Minors)|
|Sydney session||AUDCAD, AUDCHF, AUDJPY, AUDNZD, AUDUSD, EURAUD, EURNZD, GBPAUD, GBPNZD, NZDCAD, NZDCHF, NZDJPY, NZDUSD.|
|Sydney/Tokyo session overlap||AUDCAD, AUDCHF, AUDJPY, AUDNZD, AUDUSD, CADJPY, CHFJPY, EURAUD, EURJPY, EURNZD, GBPAUD,GBPJPY, GBPNZD, NZDCAD, NZDCHF, NZDJPY, NZDUSD, USDJPY|
|Tokyo/London session overlap||AUDCHF, AUDJPY, CADJPY, CHFJPY, EURAUD, EURCAD, EURCHF, EURJPY, EURNZD, EURUSD, GBPAUD, GBPCAD, GBPCHF, GBPJPY, GBPNZD, GBPUSD, USDJPY.|
|London session||AUDCHF, CADCHF, CHFJPY, EURAUD, EURCAD, EURCHF, EURJPY, EURNZD, EURUSD, GBPAUD, GBPCAD, GBPCHF, GBPJPY, GBPNZD, GBPUSD, NZDCHF, USDCHF.|
|London/New York session overlap||AUDCAD, AUDCHF, AUDUSD, CADCHF, CADJPY, CHFJPY, EURAUD, EURCAD, EURCHF, EURJPY, EURNZD, EURUSD, GBPAUD, GBPCAD, GBPCHF, GBPJPY, GBPNZD, GBPUSD, NZDCAD, NZDCHF, NZDUSD, USDCAD, USDCHF, USDJPY.|
|New York session||AUDCAD, AUDUSD, CADCHF, CADJPY, EURCAD, EURUSD, GBPCAD, GBPUSD, NZDCAD, NZDUSD, USDCAD, USDCHF, USDJPY.|
In conclusion, your favourite time for trading the forex market is dependent on your target volatility and currency pair.
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