Tokyo, London, New York Forex Trading Sessions

Forex trading is all about speculating on currency fluctuations. While a stock trader will predict the rise and fall of Google or Amazon stock, for example, a Forex trader will predict the rise and fall of the euro, yen, US dollar or Swiss franc.

Although Forex trading is restricted by European regulations, it provides the opportunity to use leverage to amplify currency movements, which are typically small (0.3 to 0.5%) compared to the volatility of stocks (2.08% on average for the CAC 40 in 2023). Forex can be traded using a variety of financial products including CFDs, futures, ETPs, options and turbos.

What can be traded on Forex

As you have already realized, Forex is all about trading currencies. Traditionally, this means trading one currency against another, often in pairs, less often in the form of an index (USD Index). The most well-known currency pairs are: EUR/USD, GBP/USD, USD/JPY, USD/CHF. More recently, currency indices have appeared, allowing traders to trade the main currency against a basket of other currencies. The best known currency indices are the dollar index, the euro index and the yen index.

Different Trading Sessions in Forex

Unlike stock markets, which have an opening and closing time each day, currency quotes operate 24 hours a day, from Sunday evening to Friday evening. However, Forex market activity can be divided into four main sessions: Sydney session, Tokyo session, London session (a favorite of many traders, where most trading takes place) and New York session.

Table of opening and closing times of each trading session

Sydney - opening 8:00
Sydney - close 23:00

Tokyo - opening 9:00
Tokyo - close 00:00

London - opening 17:00
London - closing 8:00

New York - opening 22:00
New York - closing 13:00

Winter time changeover 2024

In the United States, winter time will occur on the night of Saturday, November 2, 2024 to Sunday, November 3, 2024.

In the United Kingdom, daylight saving time will occur on Sunday, October 27, 2024. At 3am, the time will be 2am. In France and other European countries, the changeover to winter time usually occurs on the last Sunday in October. Thus, in 2024, it should also occur on Sunday, October 27.

Overlapping Sessions in Forex

You may notice that there is a period between each trading session where the sessions overlap. The Tokyo and London sessions overlap, while the London and New York sessions overlap. The most active period in Forex is when the London and New York sessions overlap.

Not surprisingly, these are the most volatile hours of the Forex trading day, as when the two markets open at the same time, there is more trading volume: more traders, more trades, more volume.

London session

The London session is historically the most active session on Forex. Regardless of the currency, the London trading session is characterized by the highest volume and activity. This is because historically London has always been at the center of commercial and financial exchanges.

London is a financial center that also specializes heavily in currencies. The City is home to some of the largest Forex trading rooms in the world. Please note: these are not the opening hours of the London Stock Exchange (Footsie). Forex traders start trading at 7:00 am.

This is the ideal session for currency trading as there are more opportunities for day traders and scalpers, tighter spreads and more liquidity to ensure better trade execution.

Pairs to favor in this session are EUR/USD, GBP/USD, EUR/GBP, USD/CHF.

New York session

The New York session of Forex is certainly the second most important after the London session. The reason is obvious: it is Wall Street. Although this American session is more suitable for trading stocks or commodities, it is no less interesting for currency trading.

Indeed, stock and commodity trades are often linked to currency trades. Moreover, it is during the US session that important announcements (Fed speeches) and the most important macroeconomic publications (NFP) take place.

Thus, the New York session is a time frame rich in opportunity and volatility. Don't forget that most Forex trades are linked to the US dollar, sometimes even indirectly.

Pairs to watch out for during this session are EUR/USD, GBP/USD, USD/JPY, USD/CHF.

Asian session

The third most important trading session after the London and New York sessions, the Asian session, or Tokyo session, is a period of significant activity for currencies such as the yen, Australian dollar, New Zealand dollar and Chinese yuan.

However, the London session is the most active for Asian currencies. The Asian session will be marked by macroeconomic publications and announcements from the BoJ (Central Bank of Japan).

As for the more exotic currencies such as the Hong Kong Dollar (HKD), Singapore Dollar (SGD) and Thai Baht (THB), these currencies should be traded during the Asian session.

European session

While we might refrain from presenting the European session, as the London session covers almost the same time frame, we felt it appropriate to note that trading volume in the Frankfurt Financial Center has increased since Brexit.

Indeed, it is too early to say that Forex is moving, but more and more trading rooms are migrating to European centers such as Frankfurt or Paris. This is still a young phenomenon, but it could lead to London losing its dominance.

Such changes, even if they become massive in the coming years, will only have a minor impact on Forex.

Advantages of Forex trading

Currency trading means speculating on the financial health of countries or geographical areas. One of the advantages of trading this type of underlying asset is the ease with which you can find macroeconomic information. Indeed, it is much easier to find the information you need about the GDP of the United States or Japan than it is to find an update on the sales of a listed company.

Other advantages include narrow spreads and sometimes even no commissions, allowing for trading styles such as scalping or automated trading. Moreover, 24/7 market access will provide individual traders with greater flexibility, allowing them to choose a schedule that fits their personal and professional schedule.

Disadvantages of Forex trading

The main disadvantage of Forex trading is the complexity of the movements that result not only from speculation but also from international capital flows. As a result, fluctuations can sometimes seem irrational.

Moreover, since currencies on Forex traded mostly in pairs, a trader has to analyze two assets at the same time. In the case of EUR/USD, a trader will have to analyze both the US dollar and the euro. Since movements in Forex are weaker than in the Forex market, traders may be tempted to use too much leverage, leading to excessive risk taking.