What may be found on this page?
- WHAT TIMES DOES THE TOKYO FOREX MARKET OPEN AND CLOSE?
- FIVE OF THE MOST IMPORTANT FACTS REGARDING THE TOKYO SESSION
- WHAT CURRENCY PARTNERS DO YOU RECOMMEND TRADING IN THE MIDDLE OF THE TOKYO SESSION?
- HOW RANGES SHOULD BE TRADED DURING THE ASIAN SESSION
- ASIAN BREAKOUT STRATEGY
According to the DailyFX series on the Characteristics of Successful Traders, one of the most profitable times to trade forex is during the Asian trading session. The Asian trading session, also known as the Tokyo session, is sometimes ignored since it is less liquid and turbulent than the other main trading sessions. However, the fact that it lacks these traits is precisely what makes the Asian session appealing to traders who are knowledgeable on how to trade it.
This article will discuss the complexities of this trading period, including listing the hours that the Tokyo forex market is open for business and suggestions and techniques that traders might think about while “Trading Tokyo.”
WHAT TIMES DOES THE TOKYO FOREX MARKET OPEN AND CLOSE?
Monday morning at 9:00 Japanese Standard Time (JST) is the beginning of the trading week for the Asian FX session, which continues until Monday at 6:00 p.m, JST, If traders in London are interested in following the Asian session in real-time, they must remain awake from 00:00 (GMT) in the early morning hours until 09:00 (GMT) in the afternoon.
Remember that transactions may occur at any moment in the foreign exchange market, making stated starting times open to interpretation, However, because of the high amount of transactions that Tokyo banks can execute, it is usually considered that the Asian session starts when the banks in Tokyo go online, Technically speaking, New Zealand and Sydney, located in Australia, are the first substantially significant financial centers to start trading for the day.
The following is a rundown of the various periods across the world’s various time zones when traders will be able to participate in the Asian trading session:
Times in crucial trading locations for the Asian trading session
Please note that these hours are subject to change due to daylight savings time adjustments.
The fact that major economic centers in Europe and the United States are not operating for the bulk of the Tokyo session is one factor contributing to the relatively low trade volumes that are seen.
FIVE OF THE MOST IMPORTANT FACTS REGARDING THE TOKYO SESSION
As a result of the reduced levels of liquidity and volatility seen during the Tokyo forex session, it is customarily known to stick to critical levels of support and resistance, The following are some characteristics of the Asian session:
- Low liquidity
- Low degree of uncertainty
- Straightforward entrance and departure points
- Ideal for sound risk management
- After the market has closed, there may be possibilities for breakout trades.
- Low liquidity
Because of lesser liquidity, non-Asian markets, including the EUR/USD, GBP/USD, and EUR/GBP currency pairs, are less likely to make significant swings outside their widely observed trading ranges, This impact is seen in the figure that follows, the Asian session is portrayed in the chart using the smaller blue boxes, while the London session and the US session are depicted using the giant red boxes.
- A low rate of fluctuation
In general, movements may be less than seen during the London or US sessions since the predominant liquidity flowing into the market is from Asia, This contrasts with what will be seen during the London or US sessions, The following picture shows erratic currency exchange rates during a single day, Outside of the Asian session, the chart has more extraordinary peaks, which indicate more volatility moves.
The EUR/USD exchange rate as a measure of volatility
Research conducted by DailyFX between 2010 and 2012 on the Characteristics of Successful Traders
- Make the entrance and exit levels very clear
Identifying support levels and resistance allows traders to initiate or exit transactions, When combined with the indications provided by indicators, this further increases the likelihood of initiating a trade that will be profitable.
- Ideal for sound risk management
Traders may be able to handle their deals more effectively if the Asian session is calm, Because of the leisurely nature of the market, it may be possible to conduct a more in-depth study of the prospective risks and rewards Because support and resistance levels typically tend to be well-defined and correlate with the trading range, it is fundamentally simpler for traders to identify support and resistance levels during the Asian session.
- Opportunities to break out after the market has closed
There is a period of overlap between the closing of the Asian trading session and the beginning of the London trading session, When this occurs, there is an immediate increase in the available liquidity, and traders often experience breakouts from previously established trading ranges.
WHAT CURRENCY PARTNERS DO YOU RECOMMEND TRADING IN THE MIDDLE OF THE TOKYO SESSION?
The most profitable currency pairings to trade during the Tokyo session will vary according to the trader and the trading technique used. Traders who want to participate in volatile markets often focus on the Japanese yen, the Singapore dollar, the Australian dollar, and the New Zealand dollar when trading currency crosses.
Traders searching for less volatile currencies often focus on non-Asian currencies, namely the EUR/USD, GBP/USD, and EUR/GBP currency pairs, to name a few.
HOW RANGES SHOULD BE TRADED DURING THE ASIAN SESSION
Because support and resistance levels are adhered to more regularly during the Asian trading session than during the more liquid London and US trading sessions, range trading is especially well-suited to the Asian trading session.
Breakouts and range trading are the two methods used most often during the Tokyo forex session. The following is an example of a short position that may be taken while trading ranges; however, the same reasoning can be used for long positions:
Trade setup: one strategy for trading ranges is to look for sell signals when the price trades near resistance and to establish an initial take profit level towards the bottom of the range, When looking for buy and sell signals, traders often use oscillators like the relative strength index (RSI) and stochastic indicators for assistance, On the graphic, the hours corresponding to the Asian session are shown in blue blocks.
Entry point: Traders using this specific trading method should be looking for indications to purchase when the price is getting close to a support level, and they should search for signs to sell when the price is getting close to a resistance level When the market has reached an overbought zone, the stochastic indicator will reflect this fact and provide a sell signal (indicated by the blue circle), The price has hit the resistance level, indicating that the chance to initiate the short trade is now available, Additional confirmation may be obtained by doing so.
Stop loss: A Stop may be put above the level of resistance since, historically, this is the level that prices have rebounded off of, A stop loss can be used to protect against a loss.
Take Profit: When making a trade, professional investors usually want to ensure that they have a larger number of pips in their favor than they stand to lose if the deal goes against them, This is known as a risk-to-reward ratio, and it needs to be at least 1 to 1 at all times, With all of this in mind, if the market goes from the top of the range to the bottom of the range, the trader is looking to make 80 pips while only risking 30 pips, which results in a risk to reward ratio of 1:2.67.
When the London and US sessions overwhelm the market with liquidity, range trading will likely be less successful. This is reflected in the chart, which shows a significant breakout to the downside, followed by a recovery inside the channel’s boundaries. Traders focusing on ranges use stops and limits to keep their exposure inside the channel.
ASIAN BREAKOUT STRATEGY
When the London trading session begins at 00:00 GMT (04:00 ET), the goal of the Asian breakout strategy is to capitalize on quick and significant price fluctuations to achieve a profit, The injection of liquidity may result in breakouts that traders can forecast.
Traders may wait to see a candle close either above or below the trading range that was seen throughout the Asian session on a chart with a modest period that ranges from five to thirty minutes. Traders may join the trade by establishing a tight stop at the most recent swing high if the price falls below the range and breaks below it. Traders may account for the number of pips extending from the high to the low of the trading range when determining how far away from the entrance level their goal level should be (in this case, 80 pips). This will ensure that the distance between the entry level and the target level is proportional.
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