What are the best pairs to trade during tokyo session

It is important to remember that forex trading hours can vary in March, April, October and November, as countries shift to and from daylight savings or summer times on different days.

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Why are the forex market’s trading times important?

The forex market’s trading times are important because, although it is open 24 hours a day, the market is more active during different sessions, or when there is a crossover between two sessions in different geographic locations, which means that spreads are tighter.

However, this increased activity is typically confined to currencies that are found in both locations of a crossover – for example, GBP/USD experiences greater trading volume when both the European and US sessions are open between 8am and 11 am (EST).

The beginning of each trading session is when the big institutions such as investment banks are active, and this is often when relevant economic data for each session is published.

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When is the best time to trade forex in the US?

Typically, the US forex market is most active just after the open of the New York session at 8am (EST). At this time, liquidity and volatility will likely be high as traders begin opening and closing their positions according to the market news for that morning.

Trading forex during the New York session

The New York session has the biggest overlap with the London session, so the GBP/USD cross can be highly liquid. The New York session is the last trading window to close on the 24-hour forex trading clock, and it often experiences high trading volume, as traders seek to squeeze the last bit of profit out of that trading session’s news announcements.

Many USD crosses experience their highest trading volumes during the New York session, and this represents a considerable slice of the forex market with USD included on one side of 44.15% of all daily forex transactions.1 The table below has information about some popular forex pairs and their average daily pip movement during the New York session over a 12-month period starting November 2018.

Pip movement during New York forex session

When Can You Trade Forex: Tokyo Session

For traders living in Murica (“America”), the trading day actually begins on Sunday night at 5:00 pm EST (10:00 pm GMT).

However, liquidity doesn’t really show up until Tokyo opens a few hours later.

The opening of the Tokyo session at 12:00 am GMT marks the start of currency trading in Asia.

You should take note that the Tokyo session is sometimes referred to as the Asian session. 

We built a Forex Market Hours tool that will automatically convert all four trading sessions in your local time zone. Use it as a reference until you remember the market hours from memory. 🧠

One thing worth noting is that Japan is the third-largest forex trading center in the world.

This shouldn’t be too surprising since the yen is the third most traded currency, partaking in 16.8% of all forex transactions.

Tokyo Session

 

Overall, around 20% of all forex trading volume takes place during the Asian session.

It’s not all coming from just Tokyo though. There are other major financial centers in Asia such as Singapore and Hong Kong.

What’s interesting is that nowadays, more forex trading volume comes out of Singapore and Hong Kong than in Tokyo.

What’s interesting is that nowadays, more forex trading volume comes out of Singapore and Hong Kong than in Tokyo.

Both Singapore and Hong Kong comprised 7.6% of overall volume each, while Japan had 4.5%.

Maybe “Asian session” is more appropriate than the “Tokyo session”? 🤔

Below is a table of the Asian session pip ranges of the major currency pairs.

PairTokyoEUR/USD56GBP/USD54USD/JPY30AUD/USD65NZD/USD58USD/CAD39USD/CHF40EUR/JPY57GBP/JPY72AUD/JPY65EUR/GBP23EUR/CHF

These pip values were calculated using averages of past data. Take note that these are NOT ABSOLUTE VALUES and can vary depending on liquidity and other market conditions.

Also, the session range for EUR/CHF has not been included since the Swiss franc has been pegged to the euro at 1.2000 during the period.

Also, the session range for EUR/CHF has not been included since the Swiss franc has been pegged to the euro at 1.2000 during the period.

An easy way to find out the current average pip range for a currency pair during the Tokyo session is to use our MarketMilk™ app.

For example, here is the average pip range for EUR/USD.

Average Pip Range for EURUSD

 

Here are some key characteristics that you should know about the Tokyo session:

  • Action isn’t only limited to Japanese shores. Tons of forex transactions are made in other financial hot spots like Hong Kong, Singapore, and Sydney.
  • The main market participants during the Tokyo session are commercial companies (exporters) and central banks. Remember, Japan’s economy is heavily export-dependent, and, with China also being a major trade player, there are a lot of transactions taking place on a daily basis.
  • Liquidity can sometimes be very thin. There will be times when trading during this period will be like fishing – you might have to wait a long, long time before getting a nibble.
  • It is more likely that you will see stronger moves in Asia Pacific currency pairs like AUD/USD and NZD/USD as opposed to non-Asia Pacific pairs like GBP/USD.
  • During those times of thin liquidity, most pairs may stick within a range. This provides opportunities for short-term day trades or potential breakout trades later in the day.
  • Most of the action takes place early in the session when more economic data is released.
  • Moves in the Tokyo session could set the tone for the rest of the day. Traders in the latter sessions will look at what happened during the Tokyo session to help organize and evaluate what strategies to take in other sessions.
  • Typically, after big moves in the preceding New York session, you may see consolidation during the Tokyo session.

Which Pairs Should You Trade?

Since the Tokyo session is when news from Australia, New Zealand, and Japan comes out, this presents a good opportunity to trade news events.

Also, there could be more movement in yen pairs as a lot of yen is changing hands as Japanese companies are conducting business.

Also, there could be more movement in yen pairs as a lot of yen is changing hands as Japanese companies are conducting business.

Take note that China is also an economic superpower, so whenever news comes out from China, it tends to create volatile moves.

With Australia and Japan relying heavily on Chinese demand, we could see greater movement in AUD and JPY pairs when Chinese data comes in.

Now let’s check out how you can trade the London session.

Forex trading is the conversion of a single currency to another. Also known as FX trading, it is one of the most active markets worldwide, attracting more than $5 trillion. It consists of a network of buyers and sellers. The forex market is a 24-hour trading platform. However, it is divided into different categories. The main categories include

  • Asian
  • European
  • North American sessions

The Asian session is slow and tough to trade in compared to the European and North American sessions. Therefore, traders need to know the best forex pairs to trade in due to the low volume and high spreads characterizing the session.

It is important to note that the Asian session can be referred to as the Tokyo session. Japan is the third largest forex trading center making Yen the third most traded currency. It contributes 16% of all forex transactions.

The Asian trading session is one of the best time of day to trade forex, as explained in the DailyFX Traits of Successful Traders series. Also known as the Tokyo session, the Asian trading session is often overlooked as it is not as liquid and volatile as other major trading sessions; but these characteristics are exactly what makes the Asian session attractive to those who know how to trade it.

This article will walk through the nuances of this trading period – listing the Tokyo forex market hours and providing ideas and strategies for traders to consider when ‘Trading Tokyo’.

What are the Tokyo forex market hours?

The Asian forex session starts off the trading week on a Monday morning at 09:00 and closes at 18:00 in Japanese Standard Time (JST). In London, traders will have to be up at 00:00 (GMT) in the early hours of the morning until 09:00 (GMT) if they wish to follow the Asian session in real time.

Keep in mind that the FX market trades 24 hours a day, so official starting times are subjective. But it is generally accepted that the Asian session begins when Tokyo banks come online due to the volume of trades they facilitate. New Zealand and Sydney, Australia are technically the first, reasonably sized, financial hubs to start the trading day.

Below is a summary of the different times traders will be able to trade the Asian session in their respective time zones:

Asian trading times in major trading locations

Trading location

Major market

*Hours (in local time)

AsiaTokyo09:00-18:00

JST

EuropeLondon00:00-09:00

GMT

United States New York19:00-04:00

ET

*These times are subject to change with daylight savings changes

Major economic centres in Europe and the US are not at work for the majority of the Tokyo session, which contributes to the thin trading volumes experienced.

Top 5 things to know about the Tokyo session

The Tokyo forex session is typically known to adhere to key levels of support and resistance due to the lower liquidity and volatility experienced. The Asian session is characterised by:

  1. Low liquidity
  2. Low volatility
  3. Clear entry and exit levels
  4. Ideal for sound risk management
  5. Breakout trade opportunities after the close

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1) Low liquidity

With lower liquidity, non-Asian markets such as EUR/USD, GBP/USD and EUR/GBP are less likely to make large moves outside of generally observed trading ranges. The chart below shows this effect with the Asian session depicted in the smaller, blue boxes, while the London session and US session are depicted in the larger red boxes.

Lower liquidity in the Asian trading session keeps price action in a channel

2) Low volatility

Because the primary liquidity coming into the market is from Asia, movements – in general – can be quite a bit smaller than what will be seen during the London or US sessions. The image below provides an indication of how volatile currencies can be throughout the day. The chart shows higher peaks (more volatile movements) outside of the Asian session.

EUR/USD as a proxy for volatility

average pip movements in EUR/USD across the major trading sessions

Source: DailyFX Traits of Successful Traders research (2010-2012)

3) Clear entry and exit levels

Levels of support and resistance assist traders with opportunities to enter or exit trades. Combining this with signals from indicators further increase the probability of entering a good trade.

4) Ideal for sound risk management

The quiet nature of the Asian session may allow traders to manage their trades better. The slow nature of the market can potentially allow for more thorough analysis of risk and reward. Essentially, it is easier for traders in the Asian session to spot levels of support and resistance as they are generally well-defined and coincide with the trading range.

5) Breakout opportunities after the close

As the Asian trading session comes to an end it overlaps with the start of the London session. More liquidity instantly becomes available and traders often witness breakouts from established trading ranges.

What currency pairs are best to trade during the Tokyo session?

The best currency pairs to trade during the Tokyo session will depend on the individual trader and strategy employed. Traders looking for volatility will tend to trade Japanese Yen, Singapore dollar, Australian dollar and New Zealand dollar crosses.

Traders looking for less volatile currencies include non-Asian currencies, mainly: EUR/USD, GBP/USD and EUR/GBP to list a few.

How to trade ranges during the Asian session

Range trading is particularly suited to the Asian trading session as support and resistance levels are adhered to more frequently than during the more liquid London and US sessions.

The two most common strategies in the Tokyo forex session involve breakouts or range trading. Below is an example of a short position when trading ranges but the same logic can be applied to long positions:

Range trading GBPUSD in the Asian trading session

Trade set up: One way to trade ranges is to look for sell signals when price trades near resistance while setting an initial take profit level near the bottom of the range. Traders will often enlist the help of oscillators such as the RSI and Stochastic indicators to provide buy and sell signals. The Asian session takes place in the blue blocks on the chart.

Entry point: Using this particular strategy, traders should be looking for signals to buy when price approaches support and to sell when price approached resistance. The stochastic indicator displays when the market is in overbought territory, providing a sell signal (circled in blue). To get further confirmation, price has reached the level of resistance and this presents the opportunity to enter the short trade.

Stop loss: A Stop can be placed above the level of resistance as historically this is the level that prices have bounced off of.

Take Profit: Professional traders always look for more pips in their favor, compared to what they could potentially lose if the trade moves against them. This is referred to as a risk to reward ratio and should be at least 1:1. With this said, if the market moves from the top of the range to the bottom of the range the trader is targeting 80 pips while risking 30 pips, representing a 1:2.67 risk to reward ratio.

Range trading is likely to be less effective when the London and US sessions flood the market with liquidity. The chart reflects this, with the large breakout towards the downside before recovering back within the channel. Range traders make use of stops and limits to maintain their exposure within the channel.

Asian breakout strategy

The Asian breakout strategy aims to take advantage of sudden sharp movements in price when the London trading session comes online at 00:00 GMT (04:00 ET). The influx of liquidity can lead to breakouts that traders can anticipate.

Asian breakout strategy

On a small timeframe (five – 30-minute chart) traders can wait to see a candle close above or below the trading range witnessed in the Asian session. If price breaks below the range, traders can enter the trade placing a tight stop at the recent swing high. When setting a target level, traders can take in to account the number of pips from the top to the bottom of the trading range range and place a target an equal distance away from the entry level (in this example 80 pips away).

Further reading to navigate forex trading sessions

Written by Jane