Introduction

In the world of forex trading, the Asian trading session, also known as the Tokyo session, holds a lot of potential for traders. While it may not have the same level of liquidity and volatility as other major trading sessions, it offers unique characteristics that make it attractive to those who know how to navigate it effectively. In this detailed article, we will explore the nuances of the Asian trading session and provide valuable insights and strategies for traders looking to trade during this time.

Tokyo Forex Market Hours

Understanding the trading hours of the Tokyo session is crucial for traders who want to actively participate in this session. The Asian forex session begins on Monday morning at 09:00 and closes at 18:00 in Japanese Standard Time (JST). For traders in London, they need to adjust their schedule to follow the Asian session in real time, starting from 00:00 (GMT) in the early hours of the morning until 09:00 (GMT). It’s important to note that the forex market trades 24 hours a day, so official starting times are subjective. However, the Asian session is generally considered to begin when Tokyo banks come online due to the volume of trades they facilitate. New Zealand and Sydney, Australia are the first major financial hubs to start the trading day.

Asian Trading Times in Major Locations

  • Asia (Tokyo): 09:00-18:00 JST
  • Europe (London): 00:00-09:00 GMT
  • United States (New York): 19:00-04:00 ET

It’s important to note that these trading times are subject to change with daylight savings changes. During the Tokyo session, major economic centers in Europe and the US are not actively trading, leading to lower trading volumes during this time.

Characteristics of the Tokyo Session

The Tokyo session is known for its unique characteristics that set it apart from other trading sessions. Understanding these characteristics is crucial for traders who want to capitalize on the opportunities presented during the Asian session.

Low Liquidity

Lower liquidity in the Asian trading session keeps price action in a channel

One of the key features of the Tokyo session is its low liquidity. This means that currency pairs like EUR/USD, GBP/USD, and EUR/GBP are less likely to experience large moves beyond their observed trading ranges. This can be beneficial for traders seeking stability and predictability in their trades.

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Low Volatility

The primary liquidity during the Asian session comes from Asia itself, leading to smaller movements in currency pairs compared to the London or US sessions. The volatility in the Tokyo session is relatively lower, as shown by the average pip movement in EUR/USD throughout the day. Traders should be aware of this lower volatility when designing their trading strategies.

average pip movements in EUR/USD across the major trading sessions

Clear Entry and Exit Levels

Due to the lower liquidity and predictable trading ranges, the Tokyo session offers clear entry and exit levels for traders. Support and resistance levels play a significant role in guiding traders in their decision-making process. Combining these levels with technical indicators can further enhance the probability of successful trades.

Ideal for Sound Risk Management

The quiet nature of the Asian session allows traders to effectively manage their risks. The slower market conditions enable thorough analysis of risk and reward ratios. Traders can spot well-defined levels of support and resistance, aligning with the trading range, which aids in making informed risk management decisions.

Breakout Opportunities after the Close

As the Asian trading session comes to an end, it overlaps with the beginning of the London session. This overlap leads to increased liquidity in the market, often resulting in breakouts from established trading ranges. Traders can capitalize on these breakout opportunities by carefully analyzing market conditions and using appropriate trading strategies.

Best Currency Pairs to Trade during the Tokyo Session

Determining the best currency pairs to trade during the Asian session depends on the individual trader’s preferences and strategies. However, there are certain currency pairs that tend to exhibit favorable characteristics during this time.

Range trading GBPUSD in the Asian trading session

Volatility Plays

  • Japanese Yen crosses
  • Singapore dollar
  • Australian dollar
  • New Zealand dollar crosses

Less Volatile Currencies

  • EUR/USD
  • GBP/USD
  • EUR/GBP

How to Trade Ranges during the Asian Session

Range trading is particularly well-suited for the Asian session due to the adherence to support and resistance levels and lower volatility. Traders can employ range trading strategies to take advantage of these market conditions.

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Example of a Range Trading Strategy

One popular approach for trading ranges is to look for sell signals when price trades near resistance and set an initial take profit level near the bottom of the range. Traders often use oscillators like the RSI and Stochastic indicators to provide buy and sell signals. By carefully analyzing the price movement within the range, traders can identify profitable trading opportunities.

Asian Breakout Strategy

Another strategy that traders can employ during the Tokyo session is the Asian breakout strategy. This strategy aims to take advantage of sudden sharp movements in price when the London trading session comes online at 00:00 GMT (04:00 ET). Traders can look for candle close above or below the trading range witnessed during the Asian session and enter trades accordingly.

Asian breakout strategy

Introduction to 24-Hour Forex Trading

The forex market operates 24 hours a day, five days a week, allowing traders to trade at any time during the global business day. Understanding the nature of 24-hour forex trading is essential for traders looking to navigate the market effectively.

Why Does the FX Market Trade 24 Hours a Day?

Unlike stock trading, which occurs on physical exchanges with specific operating hours, forex trading is conducted over the counter (OTC) through electronic communication networks (ECNs) in different locations around the world. The decentralized nature of forex trading allows it to remain open continuously until the weekend. However, it’s worth noting that the forex market is not always liquid, and specific times during the day experience higher trading volumes.

24-Hour Forex Market

What Does 24-Hour Forex Trading Involve?

The majority of forex trading is carried out by financial institutions and dealers, with only a small portion executed by retail traders. Traders typically focus on the major forex sessions such as the London session, the New York session, and the overlap between them when liquidity is high and spreads are lower. Traders do not need to be active 24 hours a day to take advantage of the forex market; instead, they choose trading times that align with their schedule and develop effective trading strategies accordingly.

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Overview of Forex Trading Sessions

Different forex trading sessions have distinct characteristics, which require traders to adapt their strategies accordingly. Understanding the key features of each session can help traders make informed decisions and maximize their trading opportunities.

Forex turnover by location

Trading Major Currency Pairs

When trading during specific sessions, it’s important to consider the liquidity and cost associated with different currency pairs. Major currency pairs like EUR/USD, USD/JPY, GBP/USD, EUR/JPY, GBP/JPY, and USD/CHF typically have higher trading volumes, resulting in reduced spreads and transaction costs for traders.

Basics of Forex Trading

For beginners in forex trading, it is essential to grasp the fundamentals and develop a strong understanding of the market. The following tips can help novice traders get started on the right path:

Free Beginner Guides

Take advantage of free beginner guides that provide comprehensive education on the fundamentals of forex trading. These guides cover various topics, including market analysis, risk management, technical indicators, and more.

Avoiding Common Mistakes

Learn from the experiences of other traders by understanding the most common mistakes made in forex trading. By identifying these pitfalls, traders can avoid them and increase their chances of success.

Stay Updated with News and Analysis

Staying informed about the latest news and analysis is crucial for making informed trading decisions. Keep an eye on market trends, economic indicators, geopolitical events, and expert opinions to stay ahead in the forex market.

Attend Trading Webinars

Participating in trading webinars is an excellent way to gain insights from industry experts. These webinars provide live updates, market analysis, and practical tips to enhance traders’ understanding and skills.

In conclusion, the Asian trading session, specifically the Tokyo session, offers unique opportunities for forex traders around the world. By understanding the market hours, characteristics, and suitable trading strategies, traders can capitalize on the advantages presented during the Asian session. Remember to constantly educate yourself, stay updated with market trends, and develop sound trading strategies to navigate the forex market successfully.