What Is a Trading Session?
A trading session is a period of time that coincides with the main daily trading hours in a given area. This phrase can refer to different hours, depending on which markets and places are being discussed. As a rule, the trading session referred to by an individual investor or trader is one day of operation of the local financial market, from the moment of opening to the moment of closing.
Forex, futures, stocks and bonds markets have different characteristics that determine their respective trading sessions during the day, and the main trading hours naturally differ in different countries due to differences in time zones.
Key Takeaways:
- A trading session is the peak hours of the day during which the financial market is open for asset exchange.
- Trading hours depend on location, markets and asset classes. So, in the Forex market, stocks, bonds and derivatives, there are also different exchange hours.
- The Forex market is open during the day and night, i.e. 24 hours, but trading activity is carried out only at certain hours.
- Forex trading is conducted in four major global trading sessions: New York, London, Tokyo and Sydney.
Trading Session Explained
A trading session is a time of day when the market is open for asset exchange. There are different trading hours in different regions and markets. In addition, the opening and closing time of the market depends on the class of traded assets. In different countries, the time of the sessions differs due to differences in time zones. However, most sessions in the world are open from Monday to Friday and remain closed on weekends.
Asset and securities prices often fluctuate at the time of market opening or closing. This is due to the fact that business news or announcements determine the trading strategy of traders. Thus, investors, traders and other market participants should be attentive to the trading session in order to profit from their trading activities through proper planning.
The Forex market, or the foreign exchange market, is highly volatile, and this helps to trade currency pairs during the period when two or more sessions overlap. Traders can use strategies such as support and resistance or breakout to benefit from the currency exchange at the moment of overlap. For example, traders can buy or sell the European currency at a point of support or resistance when the American and Asian sessions overlap.
Four Trading Sessions
Previously, there were three main trading sessions: North American, European and Asian. However, it is currently believed that the markets are most active during the trading sessions of the four largest financial cities. Despite the fact that the Forex session is open 24 hours, traders cannot exchange assets all day. They exchange currency, securities or assets only during peak hours, i.e. during the next four main trading sessions.
The New York Session
Another name for the New York session is the North American Session, which opens at 8 a.m. Eastern time and closes at 5 p.m. Eastern time from Monday to Friday. This session has a busy schedule in the early hours when the London session opens, which overlaps with the New York session.
In addition, most business news, events and announcements take place at this time, which leads to an accelerated exchange of opinions between traders. The US dollar is the most influential and traded currency in the Forex market. The liquidity and volatility of the market decrease as we approach the closing of the session. Currency pairs such as EURUSD, USDCHF, GBPUSD, USDCAD, etc. are traded here.
The Sydney Session
The Sydney session opens at 15:00 Eastern time and closes at noon from Monday to Friday. This session is characterized by low liquidity with extensive trading of currency pairs. The maximum exchange occurs in the initial phase of the session. The most suitable strategies for traders here are positional trading, swing trading, scalping and day trading.
The London Session
The London session, also known as the European Trading session, is the world’s largest forex session, accounting for 32% of all trading activity. It starts at 3 a.m. Eastern time ends at 11 a.m. Eastern time on all weekdays. In addition, this is one of the most liquid and volatile sessions, where traders get the most profit from successful currency pairs, such as the euro/pound pair.
The Tokyo Session
The Tokyo session starts at 7 p.m. Eastern time and ends at 4 a.m. Eastern time every weekday. During this period, most of the trading operations in Asia take place. This is also the first trading session in Asia. Liquidity appears only sometime after the opening of the session. Thus, the Tokyo session is characterized by low volatility and liquidity, while providing opportunities for breakthrough trading after the market closes. Therefore, stock prices during this session usually struggle with support and resistance levels.
However, sessions often overlap. This overlap occurs when most of the leading institutions, banks, traders and retail investors are active. Thus, maximum trading takes place during this period.
24-Hour Trading Sessions
There are markets with a 24-hour trading session. The most notable of them is the world currency market (forex), where currencies are traded. The Forex market is the largest and most liquid market in the world.
Unlike the stock market, the Forex market does not have a physical exchange. Rather, it consists of a number of large banks and brokerage firms that trade currencies among themselves. The Forex market is open 24 hours a day, five days a week, from Sunday evening to Friday evening.
FAQ
1. What is a 24-hour trading session?
A round-the-clock trading session is typical for highly liquid markets, such as forex, where currency exchange takes place during the day and night, i.e. 24 hours on all working days of the week (Monday to Friday).
2. What time is the trading session in New York?
The trading session of the two main New York stock exchanges – the New York Stock Exchange (NYSE) and the Automated Quotation of the National Association of Securities Dealers (NASDAQ) – lasts from 9.30 am to 4.00 pm.
3. What is a simulated trading session?
A staged trading session is a trial or rehearsal session that exchanges usually hold on any Saturday of the month to make sure that their trading system is functioning correctly. Thus, “live” ticks are visible even when the market is closed. This allows brokers to study their trading infrastructure, conduct exercises in case of unforeseen circumstances, gain access to a new system or products, etc. However, after the session closes, stock prices are updated in accordance with Friday’s close.
