Not only does the global forex market see in excess of $5 trillion traded every single day, but it’s also one of the few financial entities which is accessible 24-hours each day.
While this may be appealing to investors from across the globe, however, the market is governed by a fluid system that’s coordinated between global exchanges and largely divided into three geographical trading sessions.
So, if you’re planning to trade forex in Asia or leverage relative safe haven currencies such as the Japanese yen, you’ll need to understand the market’s structure in detail. So, let’s get started!
Start with the Basics – How Does the Global Forex Market Work?
As we’ve already touched on, the forex market is separated into three peak activity sessions; namely Asian, European and North American. These are commonly referred to as the Tokyo, London and New York sessions and can be used interchangeably by traders.
Interestingly, the forex market as a whole is most active when there’s a crossover between one or more of these individual sessions, and it’s during these times that demand, volumes and market volatility will rise considerably.
As a result of this and the underlying structure of the global forex market, traders are offered considerable advantages, primarily because they’re guaranteed liquidity and the opportunity to leverage key trends over a 24-hour period.
Before we delve a little deeper into the Asian trading session, let’s look at the structure and opening of the European and North American alternatives. The former runs from 8am to 4pm (GMT), for example, whereas the latter is accessible between the hours of 1pm and 10pm (GMT).
As we can see, a three-hour crossover can be observed here, and it’s fair to surmise that trading between the hours of 1pm and 4pm (GMT) can offer the best opportunities in terms of liquidity and leveraging short-term trend and volatility.
Where Does the Asian Session Fit into the Global Market?
As for the Asian trading session, the Tokyo Stock Exchange is open between the hours of 1am and 10am (GMT).
In this respect, there’s a two-hour crossover between the Asian and European trading sessions, with this is in play between 8am (when the London Stock Exchange opens) and 10am.
If you’re planning to target the Asian marketing and Tokyo trading hours, it’s absolutely crucial that you know the key opening times, as well as any periods where the level of demand may be highest.
For example, risk-averse traders may look to avoid the crossover with the European market as a way of minimising potential losses, whereas more seasoned investors who are looking to optimise short-term gains should target this period directly.
It’s also important to know that another of other notable countries have exchanges open during the Asian trading period, including Australia, New Zealand and Russia. This can cause a little fluctuation to the opening and closing times, while potentially creating additional opportunities to profit or offset risk.