Understanding Forex Trading Sessions

Now that you have a grasp of what forex trading is, its appeal, and the participants in the forex market, it's essential to delve into when you can actively engage in trading.

Let's explore the various forex trading sessions.

While it's true that the forex market operates around the clock, it doesn't mean that it remains equally active throughout the day. You can profit from market upswings and downswings, but attempting to make gains when the market remains stagnant can prove to be quite challenging. There will be occasions when the market exhibits minimal movement, akin to the stillness of statues under the gaze of Medusa.

In this lesson, we'll help you identify the optimal times of day for trading.

Understanding Forex Market Hours

Before we discuss the ideal trading times, let's first dissect what a 24-hour day in the forex world looks like.

The forex market can be divided into four major trading sessions: the Sydney session, the Tokyo session, the London session, and the New York session (formerly known as Trump's favorite time to tweet before his suspension).

Historically, the forex market experiences three primary trading peaks. Traders often concentrate their efforts on one of these three trading windows, rather than attempting to trade continuously throughout the entire day. This strategy is referred to as the "forex 3-session system."

These sessions correspond to the Asian, European, and North American markets, which are also known as the Tokyo, London, and New York sessions. Some traders opt to identify these sessions by the names of the continents, while others prefer to use the names of the cities.

The International Dateline marks the traditional start of a new calendar day. Since New Zealand is a significant financial hub, the forex markets open there on Monday morning, even though it's still Sunday in most parts of the world. Curiously, this opening is referred to as the Sydney session.

Throughout the week, except for the weekends, the forex market doesn't have a formal closing time. However, there is a brief lull in activity between approximately 19:00 and 22:00 GMT, when most American traders have wrapped up for the day, and Kiwi and Aussie traders are preparing for their workday.

Aside from weekends, there are just two public holidays when the entire forex market remains closed: Christmas and New Year's Day.

Below, you'll find tables displaying the opening and closing times for each trading session:

The actual opening and closing times of trading sessions are determined by local business hours, typically commencing between 7-9 AM in the respective local time zone.

Daylight Savings Time

The opening and closing times also undergo adjustments during the months of October/November and March/April due to daylight savings time (DST) transitions in certain countries like the United States, United Kingdom, and Australia.

The specific date when a country switches to or from DST varies, adding an extra layer of complexity to the schedule. Thankfully, Japan simplifies matters by not observing daylight savings time.

If you've ever wondered why the Sydney Open shifts by two hours in the Eastern Timezone, it's because when the U.S. adjusts for standard time and moves one hour back, Sydney actually advances by one hour (due to opposite seasons in Australia). Keep this in mind if you plan to trade during that period.

Dealing with DST can be challenging, but that's par for the course when the market operates around the clock. Remember that the forex market's opening hours will change in March, April, October, and November as countries transition to daylight savings time on different days.

Trading Session Overlaps

Additionally, it's worth noting that there are overlapping periods between each forex trading session, where two sessions coincide.

For instance, during the summer, from 3:00-4:00 AM ET, the Tokyo session and London session overlap.

Both in summer and winter, from 8:00 AM-12:00 PM ET, there's an overlap between the London session and the New York session.

These overlapping periods are naturally the busiest times during the trading day because they witness increased trading volume when two markets are simultaneously open. This heightened activity occurs as all market participants engage in various transactions, leading to more significant financial transfers.

Now, let's shift our focus to the average pip movement of major currency pairs during each forex trading session. You'll observe from the table that the London session typically offers the most substantial price movements. Take note of how certain currency pairs exhibit larger pip fluctuations compared to others.

Daylight Savings Time

The opening and closing times undergo changes during October/November and March/April as certain countries, such as the United States, United Kingdom, and Australia, transition to or from daylight savings time (DST). What further complicates matters is that the specific date of this DST shift varies among countries. Fortunately, Japan keeps things straightforward by not observing daylight savings time.

You might be curious about why the Sydney Open appears to shift by two hours in the Eastern Timezone. The reason is that when the U.S. adjusts for standard time and moves one hour back, Sydney, due to its opposite seasons in comparison to the U.S., actually moves forward by one hour. This is a key factor to consider if you intend to trade during this time period.

While managing daylight savings time can be challenging, it's a consequence of a market that operates continuously around the clock. Keep in mind that the forex market's opening hours will alter in March, April, October, and November, as countries make the DST transition on different days.

Trading Session Overlaps

It's also worth noting that there are intervals between each forex trading session when two sessions coincide.

For instance, during the summer, from 3:00-4:00 AM ET, the Tokyo session and London session overlap. Likewise, both in summer and winter, from 8:00 AM-12:00 PM ET, there's an overlap between the London session and the New York session.

Naturally, these overlapping periods are the busiest times during the trading day due to increased trading volume when two markets are open simultaneously. This heightened activity occurs as all market participants engage in various transactions, resulting in more significant financial transfers.

Now, let's shift our focus to the average pip movement of major currency pairs during each forex trading session. You'll observe from the table that the London session typically offers the most substantial price movements. Pay attention to how certain currency pairs exhibit larger pip fluctuations compared to others.

To access real-time data on the average pip movement for specific currency pairs, you can utilize our MarketMilk™ tool.

For instance, here's the volatility per hour for EUR/USD filtered by the London and New York sessions:

Let's delve deeper into the characteristics of each session and explore the periods when these sessions overlap.