Different Trading Sessions

 

Hello there this is tradingpedia.com and in this video we will discuss the different trading sessions on the currency market and how to make the most of them. Each trading session has its particularities and traders must be aware of their characteristics and how to use different strategies in each trading session.

This is the EURUSD showing the current price action on the 4h chart and it struggles at 1.19. It is in a rising trend in quite some time, as for the last four or five trading days it only moved to the upside. During these days, the price action had certain characteristics in various trading sessions.

The Trading Week

The trading week is also important, not only the trading day, as the trading week starts with the Asian session. If we are to see a gap on the FX market, we will see it on a Monday, providing there is not some earthshattering event happening.

It is important to understand the concept of the Sunday candlestick. While it has nothing to do with the characteristics of the London or North American session, it is a candlestick that starts the trading in Asia. For a couple of hours you will see price changing hands, for example this small candlestick shows the first transactions during early Asia.

Asian Trading Session

Every time the price action lacks activity in early Asia. The spreads between the bid and ask prices increase. There is little or no liquidity. If normally spreads on crosses like the GBPCHF two pips or so, in early Asia the spreads exceed even ten or twenty pips, depending on the broker you are trading week and the liquidity provider that the broker works with.

Think of the Asian session as being illiquid when the trading week starts. As more financial centers in Asia open up (Sydney, Tokyo, Singapore, etc.) the liquidity improves, and the market continues from the Friday’s closing. It is rare to see gaps on the currency market, so you should look at continuation from the Friday’s closing prices.

The slow Asian session is characterized by tight ranges and you may use oscillators to trade cross pairs. A cross pairs is one currency pair that does not have the USD in its componence and one way to make the most of the Asian session is to use oscillators on the small timeframes, like the five-minute chart for instance on a cross pair, and use the RSI. The Asian session was from here to here, and during this time the swings show a tight range and you can use manual scalping or even auto-trading if you have an Expert Advisor to trade with.

During the Asian session there is poor liquidity, the major pairs rarely travel and scalping on the cross pairs is the most suitable.

London Trading Session

The London session is the most important trading session in the sense that the price activity in London increases significantly. Almost always, in a strong trend, before the opening of the London session, will try to stab the highs or lows. It is no wonder that EURUSD put a new high above 1.19 and right before the London session started, it tried to trip the stops above the 1.19 and then during the London session liquidity improves and things get back to normal.

During the London sessions you have important central banks, like the ECB, BOE, SNB, etc. They announce interest rate decisions, or you have economic data out of the region that influences the market activity. London remains the most important financial center in the world, despite the fact that the City of London had capital outflows after the Brexit vote.

North American Trading Session

And then starts the North American session, which has an overlapping period with the London session. For a few hours, trading activity takes place in London and New York and this period is the most important ones especially on the fixing time. Each trading day has a fixing time, and after it passes, liquidity drains slowly but surely, and the price action begins correlating closely with the U.S. stock market because the main actors do not participate anymore.

Some exceptions exist when the FOMC Statement every six weeks, when all market participants stay late into the North American session, as that is the time when the market moves as the USD is still the world’s reserve currency.

Conclusion

To sum up, London is the most active trading session, the Asian session is the slowest one, swing trading is recommended in the London and North American session, scalping in the Asian session, and watch out for the opening on Monday as it is the most illiquid trading time.

Thank you for being here and have a great day. Bye bye.