A forex trading session
The forex market rarely closes because it is open 24 hours a day. However, the action does not happen the whole day as there are also off-hours. Depending on many factors like a trader’s skill or strategy, the profit potential is always there regardless of the direction. The forex market does not come with the possibility of gains alone. It also poses risks and losses. It is a critical moment for a trader if the market does not move at all.
Trading sessions and market hours
To be successful in forex trading, a trader must not only be familiar with trading sessions. A trader must have good knowledge about them. There are four major trading sessions, namely: the Sydney session, the London session, the Tokyo session, and of course, the New York trading session.
The peak trading sessions
The forex market consists of three peak trading sessions that include Asian, North American, and European trading sessions. Others prefer to call them by continents: Tokyo, New York, London trading sessions, respectively. Essentially, there is no difference regardless of how you want to address them. A trader would focus on one of these instead of trading for 24 hours. We call this the forex three-session system.
How the three-session system works
A new calendar day’s start is based on the International Date Line. Furthermore, the major trading session and financial center New Zealand’s forex market opens on Mondays. It is where forex trading starts. New Zealand, also called the Sydney trading session, begins on Monday when most countries are still Sunday. The forex market seldom closes, but the time between 19:00 and 22:00 GMT is a stagnant period since it’s when Americans go home from works and Australians, on the other hand, get ready for work. The forex market only closes during Christmas and New Year.
Trading sessions and daylight savings time
The forex market has no fixed opening and closing from October to November and March to April. Some countries like the USA, England, and Australia move to or from the daylight savings time. While some countries observe DST, Japan does not and sticks to the standard timings.
Suppose you are confused why Sydney Open has a two-hour shift in the Eastern timezone because when we think of it, it should only be one hour after the US moves back to the standard time. But then again, the US moves one hour back. Then, Sydney moves one hour ahead, making it two hours.
Overlapping trading sessions
If you have been observing the forex market, you may come to realize that there are times when there are two sessions open simultaneously.
If we look at the time from Tokyo and London sessions during summer, specifically at 3:00-4:00 AM ET, they are both open. The same is true with London and New York session in summer and winter at 8:00 AM-12:00 PM ET. This means during this time, it is jam-packed, and the trading volume is very high.
The bottom line
This is just a peek at how trading sessions go. This is an essential element, along with the others, that a trader must consider to learn and know to become successful in forex trading.