Forex Sessions and Best Times To Trade Forex
This trading lesson will review both forex sessions, the Asian session and main session. As a forex trader you must know the who, what, where, when and why about your trade entries. If you don’t have all five of these or only four out of five you will likely never make any pips. In this article we will talk about the “when” and specifically the best times to trade the spot fx market. We will also outline some guidelines for trading outside of the main trading session.
Forex trading hours are Sunday evening to Friday afternoon, USA time. There are two major forex trading sessions, the Asian session and the combined European and American Session, which we will refer to as the main session. Here are some illustrations.
Main Forex Session
The above chart shows the two trading sessions. It’s obvious from the lower chart that most of the activity and market participation is in the main trading times on the right. 80 to 90% of the activity in the spot fx market and the same percentage of good sustainable entry points for trades occur in roughly a 4-5 hour window of time starting about 3 hours before the US stock market open until about 1 hour afterward. These are the best forex trading times for trade entries, in the main session.
Example: In central time zone USA the main session would be at 5:30 a.m until about 9:30 a.m. for your best entry points. The U.S. stock market open is 9:30 Eastern time USA which is 8:30 central time zone USA. Just take this same logic and apply it to your time zone anywhere in the world.
In the main forex sessions there is much higher market participation and all major markets are trading at the same time, so movements are much stronger day after day. Trade volumes and liquidity are much higher when compared to the Asian market times. Sustainable trade entries may occur every day 5 days per week. If pairs are trending on the D1 or W1 time frame you can generally hold on to most entries if you get a good entry signal .
Entering fresh movements that start in the main forex sessions after a consolidation will ensure a high level of success. If a pair has been moving for several hours before you see it do not trade it (please use common sense). In the main session trade entry signals can occur on any of the 8 major currency groups, also look for supplemental trades in the main trading times on pairs where there are no plans or setups.
A sustainable entry is defined as a movement that is 75 to 100 pips or more, and gives you the freedom to close out some lots and manage your money well while riding the remaining lots if the pair is trending. Or you could close out the trade completely if you are in a non-trending or choppy market. Certain GBP pairs like the GBP/CHF and EUR/GBP may start to move sooner or ahead of the main times but after GBP news items. Remember that we are talking about the window of time for most entries, exit points or profit taking points occur later after the US stock market opens.. Pips are possible on 28 currency pairs daily trading this way.
During and immediately around this critical 4 to 5 hour window of time for trade entries there are a lot of news items on the world economic calendar that you can also monitor. These news items denoted in red can also produce a lot of movement in the main trading times. By tracking the strong news drivers you are again trying to be in tune with the “when” of your spot fx market trade entries. This calendar and other calendars like this are free.
Comparison of Main Session and Asian Session
If a currency trader only enters trades outside of the main forex sessions or only in the Asian trading times they will only get 10-15% of the sustainable entries and 10-15% of the pips and upside potential of the forex across 28 pairs. A good sustainable entry in the Asian market times occurs roughly once per 8-10 days, the rest of the time you are just scalping and at Forexearlywarning.com we do not teach scalping, we teach swing to position styles. All foreign exchange traders need to learn to trade the main trading times first. The results will be good sustainable entries and well over 100 pip moves that occur regularly in the main session.
Asian trading times volatility and institutional market participation is probably 20% of what it is in the main trading times, and this is visible on the illustrations above. If you only trade in the Asian session you will never or rarely trade the USD, GBP, EUR, CHF or CAD pairs except maybe once per month and the movements will likely retrace, a losing proposition.
New currency traders do not know this, so newbies just do not try this at all. Most newbies don’t even know when the Asian markets open. Veteran traders who have strong expertise in multiple time frame analysis will recognize these opportunities when they occur. Remember, we analyze the market daily using multiple time frame analysis.
Trading In The Asian Forex Sessions
New traders need to avoid the Asian session completely, then after about one year of successful entries in the main session, trading in the Asian session will bring you additional pips. By then you will know what you are doing and you will understand the forex market much better and will understand multiple time frame analysis. If you don’t have one year of experience successfully trading the main trading times you will struggle in the Asian trading times. Learn to trade the spot fx in the main session then transfer those skills to the Asian session.
Is it possible to make pips in the Asian session?? Yes, absolutely it is. If you start trading in the main market hours and get a full year of experience and if you set your expectations correctly for the Asian market hours. If you are willing to accept one entry every 10 days or so it is possible to trade the Asian market hours. Asian times trading requires a lot of patience. Veteran traders know this and newbies now know what to expect. Your expectations should now be properly set. Very infrequent trading and far less pips will come your way in the Asian session, compared to the main session.
The absolute only exception to trading the Asian session is people who for whatever personal reason absolutely cannot trade any other session, and who are also willing to accept the fact that their pip potential is only 10% of the pips that the market has to offer. Your expectations must be correctly set for pip potential prior to doing this. But remember, generally speaking in the Asian session the moves are smaller and then the moves consolidate and retrace. The traders who trade the Asian session need to follow the same set of rules: paper trades first, then move up to micro lot trades, then move up to full scale trading and into larger lots, the rules never change. Any violation of these rules will result in losses.
In the Asian market time of day you would be looking for fresh crosses on H4 and D1 time frames only, and possibly the W1 time frame. You would mostly be focused on the NZD, AUD and JPY pairs, which are currencies related to the Asian market. Trades may also occur on other currency groups but look for fresh H4 and D1 time frame crosses only. You can also check the news calendars for news items on these three currencies. Another possible scenario for trading in the Asian session is if the NZD, AUD or JPY pairs are oscillating in large ranges (at least 200 pips) and they all stall at the top or bottom of their oscillation cycles, at support or resistance, on the H4 time frame or larger, then it is possible to trade the fresh trend cycles and crossovers that develop on these time frames. Another possibility is if all of the JPY pairs develop fresh D1 trends and they are moving in the Asian session.
On all Asian market time entries get stops to break even ahead of the main session. Remember that entries in the Asian market times are more likely to be stopped out due to the lack of liquidity causing retracements. During the Asian session is the best time to plan your trades and write trading plans for the upcoming main session.
Other Guidelines for Best Trading Times
On the first Friday of the month is the USD non-farm payrolls (NFP) news announcement. Generally speaking the market stalls ahead of this news for 18 to 24 hours. The market does not move again until after NFP. So one day per month we suggest waiting until after the NFP news driver to conduct any trades. If you enter a trade a couple of hours ahead of NFP you must move your stop to break even or exit before this volatile news driver. Also, when you see the monthly FOMC news drivers from the USD, these generally occur around 2000 GMT which is after the main trading session, if the market stalls in the main forex session ahead of the FOMC news drivers, experienced traders can look to enter trades after this news driver as well. The NFP and FOMC news drivers are always scheduled and listed on the news calendars.
The foreign exchange market is always touted as a 24 hour market. This is a fact but this fact is way oversold to traders. Movement can and does occur at any time during forex trading hours. However you can trade the forex efficiently and make the majority of the pips in a much smaller window of time. You can trade 28 currency pairs 5 days per week using the principles outlined in this lesson, in the specified window of time in the main forex session, using the tools presented in this article. Now Forex utilizes these principles daily along with simple forex trading plans based on the trends of the forex market. If you combine a solid trading plan with these tools and trading at the correct times of the day all of this will result in making pips for almost any forex trader with far less computer time.