Trading Forex During the Tokyo Session

Forex trading during the Tokyo session simply refers to the Asian session, which includes Japan, China, and Singapore.

The Tokyo Forex trading session is the first major forex market to open every day.

Because of this, the Tokyo market sets the tone for global currency movements, especially the Japanese Yen.

There are so many intricacies to cover in the Tokyo trading sessions; from the best forex pairs to trade to the strategies to use.

We’ve explored all these and more in detail.

When is the Tokyo Forex Trading Session?

The Forex market runs for 24 hours a day, five days every week across different time zones.

The Tokyo Forex trading session is the first session to open every 24-hour trading day. It runs from 7 pm to 4 am EST.

Although it is called the Tokyo session, the Japanese currency movement and economy are not the only factors at play here.

Other Asian countries such as China and Singapore make up this session.

If you’re an Asian trader looking to trade during the Tokyo trading session, check out when your market operates:

• Hong Kong (HKT; Hong Kong Time): Operates from 9 am to 5 pm HKT.
• China (CST China Standard Time): Runs from 9 am to 5 pm CST.
• Singapore (SGT Singapore Time): Operates from 9 am to 5 pm SGT.
• South Korea (KST Korea Standard Time): Begins at 9 am KST and closes at 6 pm KST.
• Malaysia (MYT Malaysia Time): Starts from 9 am MYT and ends at 5 pm MYT.
• Indonesia (WIB Western Indonesian Time): Starts from 8 am WIB and closes at 4 pm WIB.

Key Features of the Tokyo Forex Trading Session

You need to understand the Tokyo Forex session to take advantage of early market movements or focus on Asian currencies like the Japanese Yen.

Here are the key features that define the Tokyo session:

Who Are the Major Players?

Because it is called the Tokyo session, you may be led to think that the key players within it are from Japan.

While your thinking is not entirely wrong, the major players in this session are from Japanese and other Asian investors, institutions inclusive (Key Players in the Forex Market).

Key Trading Hours

As I mentioned earlier, the Asian session runs from 7 pm to 4 am EST.

Liquidity is usually significant when this session opens and then spikes (even peaking) when it overlaps with the Sydney session.

Trading Strategies

Traders focus more on technical analysis-based strategies when interacting with the Tokyo session (Most Popular Trading Patterns).

They tend to use these strategies as a response to the range-bound market condition of the Tokyo market (What is Margin Level).

A range-bound market condition describes a market condition with a fluctuating asset price within a set range of an upper resistance level and a lower support level.

What are the Best Forex Pairs to Trade During the Tokyo Session?

One of the keys to trading forex successfully is to know which pairs do well in the session you choose to trade (Understanding Currency Pair Trading).

Here’s a look at the best pairs for trading in the Asian session in order of how actively traded they are:

U.S Dollar/Japanese Yen (USDJPY)

This pair comes first because it is the most actively traded pair in the Tokyo session (What is a Pip in Forex) .

This is because Japan and the U.S. are two of the world’s most economically significant countries, making their currencies the most traded worldwide.

Components of the Japanese economy significantly influence this trading pair. This includes everything from the Japanese GDP to key economic news reports.

So keep an eye out for details about the Japanese economy.

Australian Dollar/U.S. Dollar (AUDUSD)

The AUD/USD pair is another strong currency pair during the Tokyo session, especially during peak hours when the Tokyo session overlaps with the Sydney session (Forex Trading Advantages).

Australian economic activities like commodity exports and employment rates make up the key drivers of this pair.

This means that commodity exports significantly affect the AUDUSD pair, and any sudden changes in commodity price will influence the pair.

New Zealand Dollar/U.S. Dollar (NZDUSD)

This currency pair often reacts to key shifts in the New Zealand economy and announcements from the Reserve Bank of New Zealand (Forex vs Futures).

Unlike Australia, New Zealand’s economy is heavily dependent on agricultural trading.

Any price movements within agricultural items like meat and dairy cause market fluctuations for this pair.

Euro/Japanese Yen (EURJPY)

This pair is quite a unique one. This is because both currencies are key players in concurrent sessions; the Tokyo session and the London session which follows right after (When to Buy or Sell a Currency Pair).

Ideally, the Tokyo session determines the majority of what will happen during the London session.

That is why this pair sees steady activity during the Tokyo session.

Australian Dollar/Japanese Yen (AUDJPY)

Swing traders and position traders seem to favor this currency pair a lot more than the others (Principles of Successful Swing Trading).

They favor it more because they want to take advantage of the interest rate difference between Japan and Australia.

Factors that Influence the Tokyo Session

The Tokyo session does not operate independently. Certain factors cause it to move the way it does.

Come and have a look.

Japanese Economic Data

The Japanese economy is a significant influence on the Asian session.

For this reason, economic data such as consumer price index, trade balance data, etc., can trigger significant market changes in the Tokyo session.

Geopolitical News

Like other sessions, geopolitical affairs can affect the demand and supply of the prime currency within this session, the Japanese Yen.

Trade agreements between large economic countries like China and the United States affect this session as well.

Bank of Japan

The impact of the BOJ in the Asian session can not be overemphasized. Their decisions on interest rates and controlling bond yields often result in big market changes (Margin Call and Stop-Out Levels Among Forex Brokers).

Also, because the BOJ has a history of influencing currency values, traders within this session like to pay close attention to any hints or news from their end.

Economic Links Within the Region

While Japan’s economic situation affects the market during this session, others like China’s, Korea’s, and Taiwan’s also do.

As a matter of fact, China’s economic policies and data can result in huge market conditions in the Asian session.

Japanese Corporations

Any major decisions Japanese corporations make affect currency prices in the Tokyo sessions. It could be anything from mergers to acquisitions and even revenue announcements.

Best Forex Pairs to Trade During the Tokyo-Sydney Overlap

• Australian Dollar/Japanese Yen (AUDJPY)
• U.S. Dollar/Japanese Yen (USDJPY)
• New Zealand Dollar/Japanese Yen (NZDJPY)

Best Forex Pairs to Trade During the Tokyo-London Overlap

• Euro/Japanese Yen (EURJPY)
• Great British Pounds/Japanese Yen (GPBJPY)
• Australian Dollar/Japanese Yen (AUDJPY)
• U.S. Dollar/Japanese Yen (USDJPY)

Best Trading Strategies for the Tokyo Session

Here are my top three trusted and tested trading strategies for the Tokyo session:

Consider Range Trading

Because fewer global markets are active, the Tokyo session usually experiences smaller price movements.

It is also less volatile than other sessions so it is the perfect candidate for range trading. This strategy works best with the USD/JPY pair (1-2-3 Trading Strategy).

How Does Range Trading Work?

• Note where the price fluctuates a lot and look for support and resistance levels within these areas.
• Use RSI (Relative Strength Index) to check if the market is likely to go down or up soon.
• Only invest when the price is at a support level and sell when it reaches a resistance level.
• Finally, set up stop-loss orders to shield yourself against false breakouts.

Follow Major Economic News

If you’re trading the AUDUSD, NZDUSD, and USDJPY pairs, this strategy is worth the try.

Remain up to date on significant economic events that can trigger price conditions within this session (Optimal Forex Trading Times).

Such events include:

• Bank of Japan announcements
• Japanese economic data
• Chinese-US trade agreements
• Australian employment data
• Major geopolitical news
• Company news from big corporations within the region

Breakout Trading

The Tokyo session is usually calmer than its London and New York counterparts (Trading Forex During the London Session, Trading Forex During the New York Session).

However, market fluctuations can happen when other markets open, overlap, or during news breakouts.

If you want to trade during these breakouts:

• Monitor the price movements for a few hours and note the high and low points.
• Set up a buy order just above the high point and a sell order just below the low point.

This way, you’ll catch any price changes without incurring loss.

Key Insights

Despite being the first forex market session to open for the 24-hour trading day, the Tokyo session enjoys significant trading activity.

Also known as the Asian session, it operates from 7 pm to 4 am EST and runs through for 24 hours, 5 days a week.

One of the key drivers of this session is the Japanese economic indicators and data releases.

Nevertheless, geopolitical news, Bank of Japan, and the economies of other countries within the region, also affect the Tokyo session.