It’s always been a weird thought for me, knowing that when I'm waking up at 8 or 9 a.m. people are just going to bed on the other side of the world. When we're asleep we normally forget the fact that the world goes on turning.
In this article I will be discussing:
What The Trading sessions are?
Why the Trading sessions are important?
What are Volatility and Liquidity?
How knowing the will sessions SAVE YOU MONEY!
KEY FACTS about the different trading sessions!
Why Retail Traders LOSE!
The Best Pairs To Trade And when to trade them!
The forex market is probably one of the few things in the world that never stops, like New York, it truly is the industry that never sleeps.
By the end of this article you will have one up on retail traders, you will be able to look at the bigger picture of the forex market determining when the best times to trade are whilst being able to ignore the clickbait from news sites desperate for views and focus on the information professionals use!
What Are The Trading Sessions?
Stretching across all the continents of the world the forex market is broken up into 3 sessions: the Asian session, the London session and the New York session. As one set of Traders finish for the day another set is always starting up.
Why are Trading sessions important?
Wherever you are in the world there is always a forex trading session open whether it's in Asia, Europe, or North America.
The peak of activity is seen in the London and New York sessions, lots of sessions overlap to form time periods of drastic price movement (volatility) and large numbers of traders active in the markets (liquidity).
These sessions are also important as news is released at the start of each session that relates to that specific time zone, this is why we normally see the high amounts of active traders and big price movement in these early hours of trading.
Traders normally call this a "period of high volatility and liquidity in the market"
Hang on! what is volatility and liquidity? and why is it important?
Don't worry, I'm going to get into that right now....
As LITA Traders we love volatility, as it means there is a lot of opportunity in the market for us to make money, while our other blogs will teach you everything you need to know about how to make money in the forex market, today I'm going to focus on defining and explaining to you what volatility and liquidity are and how their impact is felt during the different trading sessions.
What is liquidity?
One reason the forex market is so liquid is because it's tradeable 24 hours a day 5 days a week, with nearly $6 trillion worth of movement each day!
There is normally a high level of liquidity in the market at any given time. However, as we now know in certain times during the day there is more liquidity than others; mainly in the London and New York sessions as this is where the highest volume of Asset Managers, professional traders or retail traders are awake and active in the markets.
Here is an example of a GBP/USD price chart showing the relationship between Liquidity and price.
As you can see from above the high levels of liquidity are seen in the London and New York sessions. you can also see the relationship between the different sessions and volatility...but wait, what's Volatility?
What is volatility?
Volatility is our friend at logikfx!
Highly volatile markets have lower liquidity, meaning that less traders either professional or retail are trading that currency asset, this means more opportunity to make money in these markets as there are less people involved with them.
Assets with high levels of liquidity tend to be less volatile due to the fact that large amounts of people are buying and selling the asset simultaneously cancelling the other out - the high liquidity markets normally move in what's called a range.
Here is an example of a ranging market:
Using common sense you can gather from this at the markets where you can make the most money that are the markets that the majority of traders do not use or are scared to use, later on I will discuss with you the most popular and also the best markets to trade that retail traders are scared of due to the markets high volatility and their poor risk management strategies.
A good understanding of liquidity and volatility can save you money!
YES, that's true! Knowing about these two fundamentals of the market can save you money on hidden fees that brokers use such as spread!
Matty Cheung our CMO will tell you how!
"During less volatile times spread is usually higher on most broker platforms, meaning the transaction cost is higher at that point in time, you can save money by placing trades in times of higher liquidity"
If you want to know how to get the benefit of saving money on transactions you will need to know the best times to place trades and how the sessions interact with one another, let's get into the different sessions and the key factors that's make each one unique...
The next section of the article I will be working in GMT or Greenwich Mean Time, however, using our training sessions timetable download below you will be able to see the local time.
The Asian Trading session
Due to the low liquidity in the Sydney and Tokyo sessions most traders combine the two and call this section of time The Asian Session:
In this session we see an overlap between the Sydney and Tokyo sessions, this is where the highest amount of liquidity is seen during this session, however, even though these are to massive centres of trade it pales in comparison to the London or New York sessions.
The Asian session runs from 10 p.m. until 8 a.m. GMT.
The session starts with the Sydney open and ends with the Tokyo close. Japan is the world's third-largest trading Centre and other notable trading centres open during this time are Hong Kong and Singapore.
The strongest moves in the session are seen in pairs that contain the Japanese Yen the Aussie dollar or the Kiwi dollar.
The London Trading session
Considered the capital of Forex , London is one of the most important, and probably proud, centres for trade in the world.
Even though in terms of size one of the smaller cities in this group it has stood its ground in true British stubborn fashion beating out bigger European and American cities such as Munich, San Francisco and LA.
London has remained one of the strongest trading centres in world History!
The London session overlaps with the New York trading session, one of the most famous of all trading centres this is when liquidity really rockets.
The New York Trading session
When the London session Traders finish their yoghurt pots and ham and cheese sandwiches (no crusts on the bread obviously) the New York Session starts. This session is probably the most famous of all thanks to Hollywood!
With most of the world's economic news being released during this session it does have a claim to being the most important session of the day.
Get your forex trading poster right now, click here!
Trading Session Overlaps
As the Forex market is open 24/5 there are always going to be overlaps in the session times
This is where we see high levels of liquidity in the markets and normally low levels of volatility
This is one of the reasons that professional traders hold their positions for so much longer with much more success than retail traders.
I'll prove why right now!
Why Retail Traders Fail
This is Harry!
Harry is a retail trader and he wants to trade GBP/USD
He is trying to figure out a better way to trade this pair as he notices he cant hold trades for longer than the London and New York sessions. (the sessions that contain these currencies)
Harrys problem is that retail traders will often only use chart patterns to decide what trades to take.
Without the strong foundation of fundamental macro-economic analysis taught by us here at logikfx Harry often can't hold his trades for more than a matter of hours.
Then when liquidity leaves at the end of the New York session at 9 p.m. GMT and volatility increases due to the open of the Asian session (meaning that's where the focus of traders is) his stop losses are hit due to his poor risk management. This means he is always having to close trades early to avoid this.
Harry turns to Professionals and LITA traders for help. They do not follow his method, our risk management methods and fundamental analysis allow Harry to trade through overlaps and periods of high volatility without having to worry about micromanaging every trade, this allows him to manage a portfolio with 4-10 assets on a more macro scale and hold trades for anywhere from 3 to 9 months.
This allows Harry to buy a BRAND NEW XBOX for himself with money left over to invest back into his future, Harry is a very happy bunny!
The Currencies with the most opportunity
Now, to get the most out of your trading experience you will need to know the best pairs to trade and what time they are most active, this is where you will see your trades move the most as the pairs that are at their most volatile.
Below I will show you the best pairs to trade and in which session they are most volatile, this will help you analyse your trades and tell you when you can expect to notice the most movement:
Basis points are a base metric used by professional traders when measuring price movements, to learn more click here!!
Taking note of time sessions is key for anyone looking to start trading, knowing when important news releases will take place and also allowing you to conduct effective analysis when data will be freshly available, make sure to download the poster from the store to help you stay in touch with the different sessions and when you need to be paying attention to the Markets.
Still learning how to trade? Learn through Logikfx Investment and Trading Academy (LITA) and take the first steps into growing your value as a trader with our free online courses, webinars, seminars. All from a small team of highly skilled traders with over 15 years’ experience in the financial markets. Learn how to make money trading forex, alongside the best ways to manage your risk through a proper trading journal, and sensible approaches to setting a stop loss (that doesn't get hit)!
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