Trading Strategy for the Asian Session

How to earn on Forex, while Europe and America are asleep? All you need to know about the Forex market hours,the key characteristics of the Asian session and a two-step strategy for trading during the Tokyo session.

How to get better results in trading? Trade according to sessions. It's not a secret that trading results depend on the session when the trade is executed, as well as the strategy choice derives from the characteristics of particular Forex market hours.

Do you know how many trading sessions are there in the world and which are the best for your trading? Let's find it out all you need to know about popular Forex trading hours.

Main article sections:

Major trading sessions

The greatest thing about Forex is its accessibility. Forex market is open 24-hours a day, 5 days a week, that gives traders plenty of opportunities to make a profit all week long (between 22:00 GMT Sunday – 22:00 GMT Friday) from anywhere in the world.

Before we proceed to the Asian session, let's speak of the major trading sessions in the Forex market. They are:

    • the Sydney session (around 9:00 PM - 5:00 AM GMT)
    • the Tokyo session (around 11:00 PM - 7:00 AM GMT)
    • the London session (around 7:00 AM - 3:00 PM GMT)
    • the New York session (around 12:00 PM - 8:00 PM GMT)

Please notice that official session starting time is quite subjective and time frames can vary insignificantly.

Every session has it's open and close time when it begins or ends. Usually, the open and close time for each session varies according to location and the time zones. Sometimes, it also varies according to seasons, because of seasonal daylight saving time (DST).

For example, the New York session is the hours when all state and commercial organizations in NY start their work, in accordance with winter and summer DST.

Fortunately, there is no need to keep all these conditions in mind, since there are plenty of Forex market time converters available online, which can give you actual and precise information about the time zone you are interested in.

What's the Asian (Tokyo) trading session and why trading it

The Asian session is often called the Tokyo session as well. It begins with the Sydney open (22:00 GMT) and ends with the Tokyo close (08:00 GMT).

Japan is the world's third-largest forex trading center and even though we call it the Tokyo session, not only Japan is involved in trading in this period. There are also Hong Kong, Singapore and Sydney that participate actively as well.

Asian (Tokyo) trading session is not as liquid and volatile as other major sessions, however, it remains highly popular, because Japan is the third-largest forex trading center in the world. The yen is the third most traded currency, which volume is participating in almost 17% of all forex transactions.

The key characteristics of the Asian session

    • Japanese commercial companies (exporters) and central banks are the main players because Japan's economy is heavily exported.
    • Liquidity can sometimes be thin, and most currency pairs stick within a range, especially if there is a big move in the preceding New York session
    • Moves in Asian currency pairs like AUD/USD and NZD/USD will probably be stronger than in GBP/USD
    • Most activity takes place at the beginning of the session because that time lots of economic news is released
    • The Tokyo trading session is the first in the day, so it sets the tone for the following sessions around the world: traders look at what happened within the Asian trading session to plan further trading activity
    • Despite being the first significant session in the day, the Asian session brings consolidation after the preceding New York session, and this is how the traders' behaviour twirl the Forex trading cycle

Here you may have a look at the average Asian pip ranges for the major currency pairs. What does a pip range mean for your trading?

The bigger the pip movements are, the bigger is the volatility and the more opportunities arise that increase the possibility to profit or loss from the trade.

These pip values are the midrange of past data and they vary according to the liquidity and other market conditions.

A two-step strategy for the Asian session

This two-step strategy is rather reliable and easy-to-execute. Because of the specific conditions, it is suitable for day trading. Let's find out, how to make money, while America is asleep?

Step one: Choose the best currency pair to trade

Volatility is highly desired by traders since it provides wide opportunities for making a profit. Unfortunately, volatility during the Asian session is not very high, but this session has its own advantages.

The most traded pair is AUD/JPY, however, the AUD/NZD or NZD/JPY pairs are also traded within the Tokyo session. The lowest volatility in the market is before 00:00 GMT, because American traders are active within 12:00 GMT and 21:00 GMT, and Australian traders, coming to the market after that, don't usually bring much movement.

Always mind the release of economic news of the countries, which currencies you are going to trade. Especially, if the release synchronizes with the beginning of a certain session.

For this strategy, you need to wait for a consolidation period between 22:00 GMT and 00:00 GMT on the M5 chart time frame. What is consolidation? Consolidation is a time period in which the markets pause and the indecision about the next price move exists. Consolidation periods are used by traders as accumulation and distribution periods before getting into their larger positions.

Important note: If the price is trending during the consolidation, this strategy should not be used, since the reversal necessary for the strategy may not occur.

Step two: Identify the trend and wait for the breakout

What's break out? A breakout is a price moving outside of a defined support or resistance level with increased volume. It's better to choose the breakout in the direction of a trend since they usually last longer.

If the breakout doesn't appear till 00:00 GMT, do not worry. Most likely, the break of the range will happen during the Asian session. Fakeouts happen quite seldom, so just know they are possible.

How to avoid fakeouts?

Two words: double-check. The volume of trades is very low in the Asian session, so opening a position when the candlestick breaks the range for the first time is not recommended.

Wait for the second, confirmation break, and open a position at the opening price of the candlestick.

Follow the strategy implementation on the example from our platform Metatrader with the M5 time frame for the AUD/JPY pair.

On the following chart, there is a bright example of the consolidation between 00:20 MT* (21:20 GMT) and 02:30 MT. As we can see, after 2:30 MT a break to the downside occurs.

*MT - Mountain Time (GMT+3 during summer and GMT+2 during winter)

When the next candlestick closes lower than the previous one, a short position is opened below the previous low at 75.62.

The stop loss is placed at 75.66 (higher than the resistance) and the take profit is placed at 75.47 (higher than the support level).

Trading tip: In case you don't want to cut profit too early, take your profit step by step, trailing the stop order in case of reversal.

Notice, that two-step strategy works only when a range occurs before the beginning of a Tokyo session. This type of consolidation is quite common and may bring you a guaranteed profit.

Go trading

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

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