Characteristics of trading session

At night, quotes usually move slowly, while in the daytime the volatility increases sharply. Forex trading sessions differ by working hours and trade peculiarities. Every session can be characterized by the most traded currency, the volatility level, and the degree of impact of fundamental factors.

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Pacific (Sydney) trading session

The work on the currency market starts with the opening of the Pacific trading session, the calmest one. No sharp fluctuations are usually seen here. As a rule, prices barely move, the market stands still, and the currency quotes trade sideways during the Pacific session. Professional traders tend to avoid opening deals in this period, but they continue monitoring the market movements, watching for a break of some key psychological or historical levels, formation of a new trend, or price reversals.

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AUD/USD and NZD/USD are the currency pairs that are most often traded during the Pacific session. It is so because the Australian and New Zealand dollars are the national currencies of the Pacific region states. When we do our market analyses during market close and see possible entries on the Aussie or Kiwi, the move often happens during the pacific trading session.

Often times this surge into our predicted direction is caused by Aussie or Kiwi news during this time. Due to fundamental reasons we'll dig into later in this masterclass. Just know that a good AUD/XXX (or XXX/AUD) or NZD/XXX (or XXX/NZD) setup will often make its move during the pacific session.

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Asian (Tokyo) trading session

At the opening of the Asian trading session, the market comes to life, and currency quotes start moving faster. The intense activity is usually seen in early hours of the session when key macroeconomic reports are published. At this time, Japan, Australia, and New Zealand often deliver their statistics.

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The EUR/JPY, USD/JPY, and AUD currency pairs are the most active ones in the Asian session. The EUR/USD pair is worth special attention as it is volatile in any trading session. Statistically, when the pair demonstrates sharp fluctuations in the American session, it usually consolidates in the Asian session.

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The market is moderately volatile and the liquidity is usually low during the Asian session. Most currency pairs trade in narrow ranges preparing for stronger movements in the subsequent trading hours. The Asian stock exchanges often set the trend for the rest of a trading day.

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European (London) trading session

The European trading session is the most lively and eventful one. The trade volumes here are large, so the trading activity is heightened. Mostly, the sustainable trends on the market are formed during the European session. Traders need to bear in mind this fact. Besides, false signals are frequent in this period, as the European dealers test the market, try to find the congestion of stop orders, and spot support and resistance levels.

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The beginning of the session is usually calm, and the price movements speed up at the opening of the London Stock Exchange. It is traders’ favorite period, as the volatility is high and EUR, USD, and GBP pairs are most actively traded.

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The peak of activity is usually seen in early and late hours, while in the afternoon traders take a short break. The price trends usually change at the end of the session.

Most currency traders will find themselves trading the London session. Anywhere from 07.00am until 11.00am GMT most setups will have materialized. Any currency pair can be traded during the European session, but most often traders open deals with EUR/CHF/JPY/GBP and USD crosses.

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American (New York) trading session

An outburst of trading activity is usually witnessed during the American trading session, involving huge sums and captivating the attention of millions of traders around the world. It is the most aggressive, unpredictable, and potentially profitable trading session. Market participants largely focus on the release of the news that often causes mixed and chaotic currency movements. The price trends that are formed in the European session can either continue or reverse during the American session.

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Geographically, the American session covers not only the United States, but also Canada and Brazil. Traders pay special attention to USD and CAD currency pairs. Besides, JPY pairs also become highly volatile in this period. Those market participants who are not afraid of sharp swings open deals on such cross-rates.

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There is one more essential aspect. It is no secret that the European banks are as influential as the American banks, so the first ones partially offset the importance of the latter. Therefore, the highest volatility is observed when the European session closes, and the US banks get the ultimate power.

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The activity in the US market decreases by Friday evening. Traders usually fix their profits before the weekends that is followed by a pullback of the major trends.

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Conclusion

It is good to know that the FX market is a 24x5 market traded in four different time zones (sessions). For the strategies that we teach in this masterclass it does not matter in which session the market is currently in when we take the trade. 

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The only thing to understand is, that the currencies of the countries that part of a time zone (session), are most heavily traded by the traders residing in those sessions (countries). So AUD/NZD will be mostly traded in the Sydney session, and EUR/GBP will most heavily be traded during the London session. However this does not mean that EUR/GBP can't make a move during the Sydney session. Therefore we take our trades based upon technical analyses, and do not worry - or take into consideration - the time zone the market is in when the trade is entered.