How Asian Forex Trading Sessions Work

How Asian Forex Trading Sessions Work

How Asian Forex Trading Sessions Work

Although it might seem irrelevant to newbies, knowing when forex markets work is a very important part of an investor’s planning and strategy. Knowing that the market works five days a week, across the world is great, but that doesn’t mean you can trade any pair at any random time and expect to make a profit.

The truth is that, large as the forex market happens to be, it doesn’t move all the time. Even when the market is active, certain currencies see peak activity at certain times – with some being dead at other times.

This makes knowing when each session begins and ends extremely important, as these times will dictate your strategy regarding what to trade and when. In essence, the time of trade might be a constant for certain markets, but the dynamics of each trading session will differ. So, there are pointers to watch out for in segmented forex markets that can make a huge difference between profits and huge losses.

For this article, we’ll take a look at Asian forex trading and its session times.

When is the forex Asian session open?

The forex Asian session is open when the Asian markets are open. However, you usually won’t want to choose just any random Asian market, so just making sure it’s daytime on a weekday on the eastern side of the world won’t cut it.

When people talk about the forex Asian session time, they usually refer specifically to the Tokyo market and its opening and closing hours. Alternately, some might refer to the Australian market since, although not an Asian country, Australia is on a close enough time zone that both sessions largely overlap – meaning a trader could well play both markets at the same time.

The Tokyo session, which is the main Asian session, opens Monday to Friday, from 9AM to 6PM Tokyo time. This trading period translates to a 12:00 – 9:00AM GMT or, in US/EST times, between 8PM and 5AM during spring and summer and between 7PM and 4AM during fall and winter.

The session as highlighted thus plays a huge role that is what the consideration of anyone who is trading forex and using Asian currency pairs for that matter. Otherwise, it will be better to avoid Asian currencies when trading forex if you are not ready to understand the time for its trading sessions.

Why does the specific time for forex sessions matter?

It’s easy to think of the global currency market as a massive mechanism where people exchange currency 24/7, a market that never sleeps and where there’s activity at any random hour.

That’s not entirely false, too. Indeed there are people all over the world performing currency exchanges at all times, in all currencies. However, that doesn’t mean markets move during all those times. While extreme, catastrophic events (such as the Brexit referendum) can make a currency take a tumble during off-trading hours, most of the time, currency values will go up or down only while their related market is open.

Due to this, it makes little sense to trade GBP when everyone in England is sleeping, or to trade AUD when it’s night over there. Forex markets move based on supply and demand, and this supply and demand is generally predicated on local developments. At night, it’s extremely rare for local developments to take place in the marketplace except it is a rather massive tsunami of some sorts.

That doesn’t mean you won’t find anyone willing to trade. There’s an after-hours market, one that’s open 24/7, so you should find someone lurking in the wings. But, since you’re in forex to make a profit from market movements, it won’t make any sense to trade at those hours – since the markets are quiet with little or no activity going on.

Are there any benefits to trading forex during the Asian session?

The answer to this depends on when the question is asked.

Not all markets move in the same way, and sometimes, it may happen that certain markets deliver a better profit to traders than others. This is particularly common if a currency has been on a constant uptick while another one, belonging to a different market, has been going down.

For example, if the JPY has been gaining value over the last few weeks, then it might make sense for traders to try to work that session – since making a profit could be as simple as buying JPY early and selling later.

In most cases, naturally, it will be more complicated than that. But as an overtly simple example, it helps and illustrates why you may want to chase a session. It’s not uncommon for certain sessions to deliver better earnings to traders, and thus, many forex traders try to arrange their schedules based on them.

What else is affected by forex trading sessions?

There’s another thing you must know about forex trading sessions. As mentioned before, they overlap depending on time zones and where markets are located.

Well, these overlaps usually bring a huge increase in liquidity for their related pairs. For example, JPY/AUD exchanges find their peak when both the Tokyo and the Sydney markets are active. On the western side, USD/GBP/EUR trades usually find their peak during the morning sessions in America, when it’s afternoon in Europe and UK/Euro markets are active.

Knowing which markets are open at all times and when these market times overlap is, therefore, a huge part of learning how to trade the Asian session in forex – or any of them, in fact.

Learning to trade forex: Asian session strategies

Many traders also have specific strategies they apply depending on which markets are active. This is because most markets have a certain degree of predictability, thus leading traders to perform certain trades, or at least look into them in consonance with the opening or closing sessions.

The first thing you need to know is what to expect. The Asian forex session is the first session of the day. For many traders, this means they need to pay attention to it (even if they don’t trade during these hours) since it sets the table for what happens later. However, the Asian session is also seen as a closer to the NYC session, and the one that consolidates what happens in this usually last segment of the day in global financial markets.

This makes the Asian session one of the most important harbingers, perhaps in relation to the NYC session. Asian markets both set the stage for what’s to happen in the next western sessions while they also are affected by how the previous western session goes. Any major news headlines in New York today will likely have a hit on the Tokyo session in the next morning.

How should I create an Asian session forex trading strategy?

The first step here is to be clear on what to expect. The main pairs traded during the Asian session are USD/JPY, USD/AUD, and USD/NZD. While alternate pairs between these currencies also exist and are traded, most traders will look at the USD as their anchor.

The second thing is, Asian markets tend to have busier openings than closings. This is because most economic news is in the airwaves early in the day, leading directly to early rather than late reactions. This is part of the reason why the Asian forex market sets the table for the rest: It moves based on what the Asian economy is looking like, and a terrible Asian session could well be interpreted as a warning for traders in other markets.

The last thing you need to keep in mind is that the strongest currency during the Asian session is the JPY. While other currencies will see movements, the main one is the Japanese Yen – and therefore, it should be your main focus unless the current economic or political climate shifts the market away.

When is it best to trade during the Asian forex session?

This depends on the type of trader you are.

Day traders will always try to trade during the times of highest volatility – that is, when the session has just opened and when it is about to close. This is because day traders profit from small variations on currency values, and higher volatility allows them to obtain better earnings if they time both their buy and sell times right.

Longer time traders, however, will find more success doing it during the middle of the day, when the market is relatively stable. These traders make the buck with mid-to-long term value variations over random noise, so the less volatile market of the middle of the day, when users aren’t in a rush to buy or sell, will usually give them a price that’s as close as possible to stable and moderated.

As it clearly shows with the two sides of the coin espoused above, a forex market trading strategy will differ for the day trader and the one who moves in the opposite direction. Why we are not looking wholesale at the best forex trading strategy here, it suffices to say that irrespective of where you choose to pitch your tent, the trading session is worth considering.

What else should I know about the Asian session?

In order to trade successfully, regardless of whether you’re doing day trading or long-term, you need to get an understanding of the Asian markets, how they relate to each other, and how they affect each other.

Rarely will you ever see all Asian markets go down at the same time. Instead, local currencies will go up or down depending on how their countries are doing – and by knowing the regional economy, you’ll be able to better anticipate which currencies will go up and which ones will go down.

The Asian market is generally considered to contain Australia, Japan, and New Zealand, as those are the main currencies traded then, and the ones belonging to the big eight. However, any Asian trader will also take a look at the Chinese market since, although the Yuan isn’t a main forex currency, China’s economy is the largest in the region – and what goes on with it will directly affect not only other Asian markets, but the worldwide economy.

Should I choose to trade during the Asian session?

It’s all up to you. There might be specific moments when the Asian session is where the money is at – however, successful traders often make a profit regardless of the active market.

What should color your decision the most is which economies you know best, and which times of the day you can better dedicate to forex trading without distractions. If you’re in the US and staying up all night is impossible, then perhaps it’s better to let the Asian session go and trade during Europe/America trading times.

In the end, the choice of which sessions to chase is yours – and since the forex market is open round the clock, you should be able to choose based on your possibilities rather than the market, although you’ll naturally have to adjust your strategy to whatever you decided to go with at the end of the day.

Conclusion

There are big players in the forex market that will issue buy orders around the clock. Doing this effectively helps them to spread the risk related to market fluctuations. However, since profit making is always at the heart of every trade, knowing the calmer times to explore in the Asian markets bodes well for day traders. For corporate players, while warehousing FX is good business in terms of risk management, an eye on the Asian markets can be a huge determinant of when to liquidate their holdings and find a safe harbor in the short term.

References

  • Forex Market Trading Sessions

https://www.investopedia.com/articles/forex/08/3-market-system.asp

  • Trading Forex Afterhours

https://www.thebalance.com/best-forex-trading-hours-1344901

  • JPY on the Rise

https://www.fxstreet.com/currencies/usdjpy

Author Profile

Fat Finger

Fat Finger

Hello everyone!

My name is Phat Fin Ge, but most people just call me Fat Finger or Mr. Finger.

Many years ago, I was a trader on the Hong Kong Stock Exchange. I became so successful that my company moved me to their offices on Wall Street. The bull market was strong, but my trading gains always outperformed market averages, until that fateful day.

On October 28th, 1929, I tried to take some profits after Charles Whitney had propped up the prices of US Steel. I was trying to sell 10,000 shares, but my fat finger pressed an extra key twice. My sell order ended up being for 1,290,000 shares. Before I could tell anyone it was an error, everyone panicked and the whole market starting heading down. The next day was the biggest stock market crash ever. In early 1930, I was banned from trading for 85 years.

I went back to Hong Kong to work at my family's goldfish store. Please come and visit us at Phat Goldfish in Kowloon, only a 3 minute walk from the C2 MTR entrance.

I thought everyone would forget about me and planned to quietly return to trading in 2015. To my horror, any error in quantity or price which cause a problem kept getting blamed on Fat Finger, even when it was a mix up and not an extra key being pressed. For example, an error by a seller on the Tokyo Stock Exchange was to sell 610,000 shares at ¥6 instead of 6 shares at ¥610,000. That had nothing to do with me or with how fat the trader's finger was, but everyone kept yelling, "Fat Finger! Fat Finger!" In 2016, people blamed a fat finger for a 6% drop in the GBP. It really was a combination of many things, none to do with me or anyone else who had a wider than average finger.

Now that I can trade again, I'm finding forex more interesting than stocks. I've been doing some research on trading forex and other instruments and I'll be sharing it here.

If you see any typing errors, you can blame those on my fat finmgert. If you see any strange changes in price, it's not my fault.

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