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Trading The Forex Sessions

By John Kicklighter, Currency Analyst at DailyFX.com
Published: November 6, 2008

Though the forex market runs twenty-four hours a day, there are still periods during each day when price action is more volatile than
others. When trading currencies, these time frames are essential as they can define an intraday trade or present hazards for long-term
traders entering and exiting the market. In this article, we will break down the trading day into the three major forex sessions, cover the
most active times, and give some insight as to why we should expect this relationship to hold in the future.

Forex Sessions

There are three major financial centers around the world; and it isn’t a coincidence that activity in the currency market rises and falls
when the markets in these regions are open for business. In fact, it makes sense that given the major financial institutions’ deals,
speculators’ trades, and day-to-day business, transactions are performed during each center’s normal business day. So, there should
be a greater level of price action in currency markets around the same time. The three major sessions for the global financial markets
covers activity in the Asian, European, and North American markets, spanning most of the world’s time zones.

The Asian session is centered on the active Tokyo trading hours. Officially, this encompasses the times that the Tokyo Stock Exchange
is open between 7:00 PM and 4:00 AM (EST), but it stands to reason that the currency market gets going an hour or two before and after
the equity markets begin and end their day. As a financial center, the Tokyo session includes liquidity from not only Japan, but also
China, Australia, New Zealand, India, Hong Kong, Singapore, and many other Asian-Pacific nations.

Europe is very dense in terms of both population and accumulated wealth. While the Eurozone is centered on its largest economy
(Germany), Europe’s financial capital is London. Exchanges in the UK are officially open between 3:00 AM and 11:30 AM (EST); but,
once again, the presence of traders in European countries east of London and the all-hours nature of the forex market expand this
range in both directions by a few hours. When the London session is open, liquidity from Germany, France, Italy, Spain, the
Netherlands, Switzerland, plus African and Middle Eastern nations, among others, are contributing to liquidity for the foreign exchange
market.

Finally, the North American session ends the calendar day with a concentration of activity around the opening hours of the New York
exchanges. New York’s exchanges are active between the 9:00 AM and 4:30 PM (EST), but many currency traders in the time zone will
log on a few hours early to see how price action is developing before the official open of markets in the U.S., as well as to watch many
U.S. economic releases, which usually come out at 8:30 AM (EST). In this time zone, liquidity from the U.S., Canada, Mexico, Brazil,
and other South American countries is represented.

Session Key Market Time (EST) Time (GMT)

Asian Session Tokyo 19:00 PM – 04:00 AM 00:00 AM – 09:00 AM
European Session London 02:00 AM – 12:00 PM 07:00 AM – 17:00 PM
North American Session New York 08:00 AM – 16:00 PM 13:00 PM – 21:00 PM

The Average Hourly Reaction From EUR/USD

Running through the last three years of price action, we have found that volatility across the majors rises and falls during certain
periods. Since the fluctuations are pretty consistent across the dollar-based majors, we have used EUR/USD as a benchmark for the
seven majors. The graph below shows the average range for each hour in a twenty-four-hour day. The results clearly reveal periods of
heightened and reduced activity. In fact, the most lively time (9:00 AM EST or 2:00 PM GMT) for the markets sees more than three times
the average range that the slowest period (5:00 PM EST or 10:00 PM GMT) does. Beyond this, we can make the observation that price
action generally rises through the opening hours of each of the three major sessions. In fact, over the opening hour of the Asian
session, the EUR/USD averages a 13-point range; at the beginning of the European session, the EUR/USD moves 23 points; and at
the start of the North American session, price action tops 31 points.

The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. Forex Capital Markets, L.L.C.® assumes
no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. Forex
Capital Markets, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. Forex Capital
Markets, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may
result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.
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Average Hourly EURUSD Activity EURUSD Hourly

35.00

30.00

25.00
Hourly Change

20.00

15.00

10.00

5.00

0.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Time

The Top Market Moving Periods For Forex

Considering price action increases when there are more traders in the market, it isn’t surprising that the currency market is most active
when the major sessions overlap, drawing the greatest level of global participation. It is easy to see in the chart of hourly EUR/USD
ranges above that the greatest level of price action occurs when the U.S. and European sessions overlap between 9:00 AM and 12:00
PM (EST). The reaction over the next two hours is comparable, but slightly more reserved. However, the mere presence of traders isn’t
the only component to activity around this time. Another element behind the high volatility during this period is the frequency with which
major U.S. economic indicators are released. Major market-moving indicators like nonfarm payrolls, the consumer price index, and
retail sales, among others, are released at about 8:30 AM (EST). The same considerations, no doubt, apply to the increased activity
around 4:00 AM (EST)—when the early part of the European session overlaps with the latter part of the Asian session, and when a lot of
the German and Eurozone data is released. The sharp spike at 4:00 PM (EST), on the other hand, is unique to the EUR/USD. This is
largely due to the closing of the U.S. markets. The reaction is specifically reflected in this pair because it is the most heavily traded.

The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. Forex Capital Markets, L.L.C.® assumes
no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. Forex
Capital Markets, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. Forex Capital
Markets, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may
result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.
 www.dailyfx.com

DailyFX Research www.fxcm.com

sales@fxcm.com
1.212.897.7600
1.888-50-FOREX

GBPUSD
Maximum Hourly Average Range For Majors Between 9:00 AM And 11:00 AM
USDCAD
45.0 EURUSD
GBPUSD
USDCHF
40.0
USDJPY
35.0 NZDUSD
USDCAD EURUSD USDCHF AUDUSD
30.0
USDJPY
25.0
Pips

NZDUSD AUDUSD
20.0

15.0

10.0

5.0

0.0
Currency Pair
Using This Knowledge In Your Trading

Knowing when the markets are active or slow is vital for all forex traders. For the short-term day trader, basing your positions around
the more volatile periods of the day increases the probability that the trade will play out while you are still at your computer. Conversely,
for longer-term traders, a lull in price action presents a more stable period to enter a trade. Altogether, recognizing the active times of
the twenty-four-hour currency session allows a trader to more confidently choose the ideal trading period without feeling like they are
missing out while they are asleep.

The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. Forex Capital Markets, L.L.C.® assumes
no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. Forex
Capital Markets, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. Forex Capital
Markets, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may
result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.