Understanding Forex Market Sessions

When I started Forex trading, I genuinely thought I had to be trading for 24 hours, 5 days a week, and 240 days in a calendar year! Genuinely! I kid you not. I thought that was the only way you made money in the Forex Market.

Until I learned that it all depended on your strategy and the kind of lifestyle you sought to live.

All the questions you ask yourself about what approach to use or how often you should trade, can all be answered by first asking, “Why do I want to trade in the first place?”

Trading Sessions

There are 4 different trading sessions, a trader can operate within. There is no “one session fits all approach” as the best time to trade is determined by your strategy and understanding of currency pairs.

But before we just right into it, what do I mean by break down the market sessions?

Take note of each session, be it Australian, Asian, London, and New York. Plot these sessions on your chart for 1 FULL DAY! Just one day. And focus solely on that day. Fortunately enough, you can do just that on MetaTrader, TradingView and Plus500 before the day’s candlesticks have even formed.

In this post, we will cover the importance of this, and how you can use this to spot opportunities. We will also look at the benefits of analyzing the Forex markets in this way.  

Below, is a breakdown of the sessions.

(Source – TradingView)

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Time of the different trading sessions

Blue: 11pm – 8am (Sydney Session)

Red: 1am – 10am (Tokyo Session)

Green: 9am – 6pm (London Session)

Purple: 2pm – 11pm (New York Session)

You can draw up these vertical lines before the day begins, I drew then afterward just to show you how this works.

This will help you realize that the most activity, all dependent on the pairs you trade too, happens/happened in the London Session.

Now we know that with this pair we should expect the bulk of the movement in the London session, therefore this is the best time to capitalize on opportunities. You must follow this process several times to spot the patterns.

Because we understand that the market moves in cycles, whether bullish, bearish, or range-bound. Our goal is to optimize our profits in bullish and bearish markets and leave the rest alone.

Benefits

Sometimes the markets can look pretty messy, things can seem stagnant and unappealing to the eye. But analyzing in this way makes it easy to ignore the noise around the sessions that interest you and the way you trade.

Spotting the highs and lows of each session will help you make a clear judgment call over the next few periods because of the trend the pair may be in. For example, the move just after Tokyo (which is known as a slow session because the major banks aren’t active around that time).

Another thing to be mindful of is that the major currency fundamentals fall within the London or New York sessions, which helps the price action move clearly in one direction. When the market moves in a clear direction this provides more opportunity and it is far easier to profit.

As a beginner, this is the best way for you to understand the different sessions as well as how they affect different pairs. Once you have this understanding, you can determine if looking at the Forex market in this way helps you to develop into a better trader over time.  

You can spot opportunities by looking for candlestick formations during different sessions. For example, the shooting star formed in the London session (right out of the Tokyo session). These candlestick formations can indicate what direction the market should move over the coming sessions.

 

In closing, pay attention to your periods, and don’t be afraid to add indicators for confluence such as RSIs, Moving Averages, or Bollinger bands.

Happy trading Traders!

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Emmanuel Maphosa

Emmanuel Maphosa

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