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Forex Four Major Markets

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Forex Four Major Markets

Overview of Forex Four Major Markets

If you are looking for times of major volatility, then look for times when two sessions overlap. Also note, trading on Fridays and Sundays can be a costly venture. Sunday is when investors are looking for the news to create a market path. Paths can often go one way Sunday and completely reverse come Monday. Same case for Fridays. NEVER hold a trade through the weekend as you are exposed to gaps in the market come Sunday when markets open due to news announced when the market is closed throughout the weekend. The only exception is if you plan on swinging a trade for an extended period of time, and it is a part of your strategy.

What are the four major markets to trade?

The four major markets to trade include the London Session (3am EST-12pm EST), the New York Session (8am EST to 5pm EST), the Sydney Session (5pm EST to 2am EST), and the Tokyo Session (7pm EST to 4am EST). During summer and winter months from 8am to 12 pm the London and New York session overlap.

London Session

It is this session that 99% of traders keep their eyes on as London controls essentially the entire European market movements. Roughly 30% of all market transactions take place in the London Session. The following is important to keep in mind when trading the London Session:

  • Due to the London Session overlapping with two other major trading sessions, a large portion of Forex transactions are made during this time. This leads to a massive surge in liquidity which can also lead to lower transaction costs as there will be more volume per user at the broker level
  • The London Session is known to be specifically volatile for the EUR/USD (EU), as there is a plethora of European news that is released within a couple hours of the opening of this session
  • Most Major movements that occur during the London Session also carry over into the New York Session
  • The best times to trade the EU & GBP/USD is during the overlap of the London & New York Session Price action may slow down and trends start to change as European traders close their trades and take their profits

The New York Session

This session begins at 8:00 a.m. Eastern Standard Time. This is the most actively traded session for all Forex traders, owing to the significant market news that occurs during this session. The USD/JPY or EUR/USD are the most frequently traded pairs during this session, along with Gold on occasion.

It is critical to keep the following in mind when trading the New York Session:

  • The introduction contains the most significant news.
  • Every major transaction in the globe includes the USD, which means that once significant news affecting the USD is out, anything immediately tied to it will move dramatically.
  • After 1 p.m. EST, the New York Session begins to significantly slow down.

Friday afternoons are nearly completely devoid of activity, as Asian and London traders prepare for the weekend.

London/ New York sessions Most active Currency Pairs:

  • EUR/USD
  • USD/CHF
  • GBP/USD

The Tokyo Session

The Tokyo Session is often referred to as the Asian session because Tokyo is the financial capital of Asia. Japan is the third largest trading center in the world, and the Japanese Yen is the third most traded currency partaking in 16.5% of all forex transactions. Overall about 21% of all transactions take place during this session. The following is important to keep in mind when trading the Tokyo Session:

  • The most commonly traded pair is the USD/JPY
  • The Bank of Japan (BOJ) has been known to inject massive amounts of government printed money into the markets should they feel their currency is getting too strong. This has caused the markets to move 2000 pips within 20 minutes in the past
  • Liquidity can often be very thin, therefore making this session boring because of the lack of activity
  • It is more likely to see movement in Asia Pacific pairs like the AUD/USD and NZD/USD opposed to pairs like the GBP/USD
  • Most action takes place early in this session due to major economic data that is released. The AUD/USD is known to make large movements during this time.

The Sydney Session

This session is starts and ends the trading week Starting on Sunday at 5pm EST and ending the week at 5pm EST. This session focuses on the volatility of AUD pairs. (ex. AUDUSD, GBPAUD, AUDJPY. Normally this session has a very low volatility compared to the other sessions.

Tokyo/Sydney sessions Most Active Currency Pairs:

  • EUR/JPY
  • AUD/USD
  • USD/JPY
  • AUD/JPY

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Simeon Bala
Author: Simeon Bala

I am a finance market research analyst with over five years of experience. I have a strong interest in personal finance and investment research. I am also a skilled copywriter.