For traders living in Murica (“America”), the trading day actually begins on Sunday night at 5:00 pm EST (10:00 pm GMT).
However, liquidity doesn’t really show up until Tokyo opens a few hours later.
The opening of the Tokyo session at 12:00 am GMT marks the start of currency trading in Asia.
You should take note that the Tokyo session is sometimes referred to as the Asian session.
This shouldn’t be too surprising since the yen is the third most traded currency, partaking in 16.8% of all forex transactions.
Overall, around 20% of all forex trading volume takes place during the Asian session.
It’s not all coming from just Tokyo though. There are other major financial centers in Asia such as Singapore and Hong Kong.
What’s interesting is that nowadays, more forex trading volume comes out of Singapore and Hong Kong than in Tokyo.
Both Singapore and Hong Kong comprised 7.6% of overall volume each, while Japan had 4.5%.
Maybe “Asian session” is more appropriate than the “Tokyo session”? 🤔
Below is a table of the Asian session pip ranges of the major currency pairs.
These pip values were calculated using averages of past data. Take note that these are NOT ABSOLUTE VALUES and can vary depending on liquidity and other market conditions.Also, the session range for EUR/CHF has not been included since the Swiss franc has been pegged to the euro at 1.2000 during the period.
Here some key characteristics that you should know about the Tokyo session:
- Action isn’t only limited to Japanese shores. Tons of forex transactions are made in other financial hot spots like Hong Kong, Singapore, and Sydney.
- The main market participants during the Tokyo session are commercial companies (exporters) and central banks. Remember, Japan’s economy is heavily export-dependent, and, with China also being a major trade player, there are a lot of transactions taking place on a daily basis.
- Liquidity can sometimes be very thin. There will be times when trading during this period will be like fishing – you might have to wait a long, long time before getting a nibble.
- It is more likely that you will see stronger moves in Asia Pacific currency pairs like AUD/USD and NZD/USD as opposed to non-Asia Pacific pairs like GBP/USD.
- During those times of thin liquidity, most pairs may stick within a range. This provides opportunities for short-term day trades or potential breakout trades later in the day.
- Most of the action takes place early in the session when more economic data is released.
- Moves in the Tokyo session could set the tone for the rest of the day. Traders in the latter sessions will look at what happened during the Tokyo session to help organize and evaluate what strategies to take in other sessions.
- Typically, after big moves in the preceding New York session, you may see consolidation during the Tokyo session.
Which Pairs Should You Trade?
Since the Tokyo session is when news from Australia, New Zealand, and Japan comes out, this presents a good opportunity to trade news events.Also, there could be more movement in yen pairs as a lot of yen is changing hands as Japanese companies are conducting business.
Take note that China is also an economic superpower, so whenever news comes out from China, it tends to create volatile moves.
With Australia and Japan relying heavily on Chinese demand, we could see greater movement in AUD and JPY pairs when Chinese data comes in.
Now let’s check out how you can trade the London session.