Choosing the Best Session to Trade

You may have heard it said that Forex trading is a 24-hour game. As one regional exchange closes its doors, another one opens. You could certainly follow them all through the day and night if you had the will and the stamina to do so.

That’s rarely a good idea, though. No one makes the most rational decisions if they’re deprived of sleep or jacked up on caffeine and trading for 24 hours a day is not a viable lifestyle choice.

So which session should you trade? For many people, this will be dictated by their existing lifestyle, family or other commitments. If you have a day job, your boss is unlikely to be pleased to find you trading from your work computer during office hours. If you are self-employed, you might have your own vital work tasks to get through during the day.

There are four major trading sessions: The London session, the New York session, the Tokyo Session and the Sydney session.

The London session runs from 7 am to 4 pm. New York overlaps – using GMT as a base, it starts at 1 pm during winter months and ends at 10 pm. Sydney opens at 9 pm and closes at 6 am and Tokyo opens at 11 pm and closes at 8 am. Just to make things a little more awkward, you also have to take seasonal changes into account when the clocks go forwards or back for daylight saving time. Not all regions do this and not everywhere does it on the same day.

If your choice of when you trade is not tightly dictated by your personal circumstances, you might wish to take the nature of these various sessions into account.

The times when these major sessions overlap tend to lead to a lot of activity. The London session has a major overlap with New York, so this is a popular time to trade. Although known as the London session it’s also the active period for the whole of Europe so there are a huge amount of transactions taking place, leading to high liquidity and lower pip spreads. The majority of trends begin during this session. A trend will generally continue into the New York session but may reverse at the end of the London session if enough traders decide to lock-in their profits.

The New York session tends to be highly liquid during the overlap with London and many economic reports and news items are released towards the start of this session. When the European markets close, the New York session tends to become less liquid and volatile.

The Sydney and Tokyo sessions have even more overlap than London and New York and are generally run together to form the ‘Asian session’. This market is generally the first to see a lot of activity after the weekend break. Most forex transactions in the region are made in Japan but other financial hotspots such as Hong Kong, Singapore and Sydney are also important.