Start trading Forex: Tutorial Part 2

In the previous tutorial lesson we learned about Forex, size of Forex market and major trading instruments or known as Currency pairs. If you missed it you can find it in this link.

And now in this lesson we will learn about the different trading sessions when you can trade.

24 hour Market
The forex market is a seamless 24-hour market. Most brokers are open from Sunday at 4:00 pm EST until Friday at 4:00 pm EST, with customer service usually available 24/7.

Yes, it is true that the forex market is open 24 hours a day, but that doesn't mean it's always active the whole day. You can make money trading when the market moves up, and you can even make money when the market moves down. BUT you will have a very difficult time trying to make money when the market doesn't move at all. This lesson will help determine when the best times of the day are to trade.

Market Hours
Although Forex market is a 24 hour market but it consists of 3 different trading sessions. The Tokyo session, the London session and the New York session.

The table below shows how the forex market opens and closes around the world:

Market	Open (GMT)	Close (GMT)
Tokyo	11:00 PM	8:00 AM
London	7:00 AM	4:00 PM
New York	1:00 PM	10:00 PM

As you can see there are times when two markets overlap, these are the times when market moves the best. And now lets take a look at at the average pip movement of the major currency pairs during each trading session.

Pair	Tokyo	London	New York
EUR/USD	76	114	92
GBP/USD	92	127	99
USD/JPY	51	66	59
AUD/USD	77	83	81
NZD/USD	62	72	70
USD/CAD	57	96	96
USD/CHF	67	102	83
EUR/JPY	102	129	107
GBP/JPY	118	151	132
AUD/JPY	98	107	103
EUR/GBP	78	61	47
EUR/CHF	79	109	84

From the table, you will see that the European session normally provides the most movement.

Now lets take some important notes on each trading sessions.

Tokyo Forex Trading Session

The 6 things you need to know about Tokyo session:

1. Commercial traders make up more volume in the Tokyo market than they do in any other. Because Hong Kong, Sydney, and other major exporting areas are trading alongside Tokyo, many manufacturers are selling their foreign currency for local currency.
2. Commodity prices (oil, food, wool, etc.) are very important to Tokyo since major commodity producers like Australia and New Zealand are buying and selling currencies.
3. Tokyo can set the stage for the next day. A big movement in Tokyo may trigger similar buying and selling action later by European traders, and later by Western-world (North and South American) traders.
4. Pairs that include AUD or JPY are usually most active during this trading session. The dollar, the largest component of the foreign exchange market volume, is often traded with each of these currencies in the AUDUSD, and USDJPY pairs.
5. Early trading can be wild. Since Tokyo is the first market to start a new trading day—and also the first market to kick off a trading week—there is often pent-up demand for currency trades that were thought up over the weekend. As a result, the first hour of Tokyo trading can be very volatile, but also enormously profitable!
6. Tokyo often corrects New York’s overbuying and selling. If US trading sessions create big moves in a particular pair, the move may reverse in the following Tokyo session.

London Forex Trading Session

The 4 things you need to know about London session:

1. The London market is typically the most volatile market due to the fact that it follows the Asian trading session and opens into the American trading session.
2. The London market is the most liquid session for all European denominated pairs, with GBPUSD and EURUSD being the most active currency pairs.
3. The session is least active in the middle, when traders have taken their lunch. Also, since London follows Asia and leads into the American session, there are two overlaps in trading at the beginning and end of the day. The middle part of the session, then, is made up of only European traders, most of who are away from the markets for a brief timeout.
4. The London session is the only trading time that harbors a very important global currency officially used by multiple nations. The Euro.

New York Trading Session

The 4 things you need to know about New York session:

1. The dollar can be found in more than 40% of all currency transactions, it makes up an even greater share during the New York session.
2. Fridays are dead, at least most of the time. In closing up shop for the week, the New York market is the last to close. Asian and European traders are enjoying their weekends, and are away from the markets. In the Americas, traders may close up their positions early in preparation for a restful weekend.
3. Every first Friday of the month is the very important “Non-Farm Payroll” report, also known as NFP, which is the key statistic for American employment numbers. In the fifteen minutes preceding the release, traders start placing bets on how this data will affect the market. At release, dollar-denominated pairs are known to move wildly!
4. Traders are less active in the afternoon, since this half of the trading session does not include European participants. Also, late lunches and trading breaks mean there are less traders moving money around.
5. Commodity prices, especially oil, are important to traders active in the New York session. The price of oil greatly affects the US economy, as well as the Mexican and Canadian economies, which are both heavily tied to oil exports.

That's it today. In the next lesson we will discuss buying and selling in forex.