Forex three session Tokyo session

In the previous article, we briefly talked about the forex trading hours and also give some suggestions how what products we should trade during each market overlapping period. In this article, we will talk about the three sessions in details. They are Asian Session (Tokyo), European Session (London) and North American Session (New York). These names are used interchangeably as the three cities represent the major financial centers for each of the regions. The markets are most active when these three powerhouses are conducting business as most banks and corporations make their day-to-day transactions and there is a greater concentration of speculators online. Now let's take a closer look at each of these sessions.

Asian Session (Tokyo)

The opening of this session at 7pm EST. Tokyo is the financial capital of Asia and Japan is the third largest forex trading center in the world. The Japanese currency – Yen is the third most traded currency as 16.5% of all forex transactions. There are many other countries with considerable pull that are present during this period including China, Australia, New Zealand and Russia. Normally, there is about 21% of all forex transactions take place during this session.

There are a few things you need to know about this session:

Australia and New Zealand are the major commodity producers, they often buy or sell currencies during this period, the commodity prices (such as oil, food, wool, etc) are very important to Tokyo.

Because Hong Kong, Sydney and China are trading alongside Tokyo, many manufactures are selling their foreign currency for local currency. Therefore, lots of commercial traders create more volume in the Tokyo market comparing with other markets in the world. The main market participants during this period are commercial companies like exporters and central banks.

Some major currencies pairs like AUD/USD, NZD/USD and USD/JPY are normally most active during this period.

As Tokyo session is the first session in the day, it can set the stage for the day. A large movement in Tokyo may impact the similar effect buying and selling action later by European traders and North American traders as traders in the later sessions will look at what happened during the Tokyo session to help organize and evaluate what strategies to take in other sessions. In addition, Tokyo is the first market to start a new trading week, there is often pent-up demand for currency trades that were thought up over the weekend. Thus, the early trading in Tokyo can be wild and also is a significantly profitable chance as well.

Normally, the Tokyo corrects New York’s over-actions (both buying and selling). If there is a big move in a currency pair in New York session, and then the move may reverse in the following Tokyo session.

Sometimes, the liquidity during this session is very thin and you might have to wait a long time before getting a nibble. As a result, most of pairs my stick within a range, this provides opportunities for short day trades or potential breakout trades later in the day.

The news from Australia, New Zealand and Japan comes out during this period; it is a good opportunity to trade news events. As Australia and Japan relying heavily on Chinese demand and China is also an economic super power, so news from China also can create volatile moves. Therefore, we could see greater movement in AUD and JPY pairs when Chinese data comes in.

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