Guide to Forex trading

A Guide to Trading Forex During the Asian Trading Session

There are plenty of ‘forex for beginners’ guides published online, but many of these are quite generic in nature and don’t focus on one particular aspect of trading over another.

For example, the $7.5 trillion-a-day forex market is accessible 24 hours and across three distinct trading sessions, each one driven by the respective stock exchanges in New York, London and Tokyo (among others).

Not all of these sessions have been created equal, and it’s important to research the precise timeframe in which you intend to trade and its key characteristics in terms of volume and liquidity.

In this article, I’ll discuss the key considerations when trading during the Asian session, while appraising the best currency pairs and strategies for these hours.

Getting Started – What are the Major Asian Currency Pairings?

Unsurprisingly, each trading session is different in terms of the most popular and widely traded pairs, depending on the countries that feature within a specific region and their economic standing.

For example, figures suggest that the dominant EUR/USD pairing (which accounts for approximately 24% of daily forex trades globally and features currencies that are underpinned by huge global economies) is the most traded pair globally.

However, it’s the USD/JPY that’s most commonly traded during the Asian trading session, with this pair comprising 20% of all trading activity within this timeframe and known as a viable safe haven during times of economic tumult. It certainly offers value to long-term investors thanks to its largely predictable nature and close correlation with US treasuries and their distributed bonds.

Other popular pairings in the session also include the Japanese yen, while those featuring the Australian dollar, the New Zealand Dollar and the Chinese yuan are widely traded too.

Unsurprisingly, the CNY/AUD is also widely traded during the Asian trading session, with these currencies associated with two huge commodity-driven economies and among the most liquid assets in the marketplace.

Understanding the Asian Session and its Key Characteristics

Before you get started here, I’d also recommend understanding the basics of the Asian trading session and its accessibility.

In practical terms, this session runs between during the opening hours of the Tokyo Stock Exchange, which start at 12am GMT and run until 6am GMT. Despite this, there’s a wider and broader trading session that actually runs between 11pm and 8am GMT, with currencies such as the Russian rouble also traded prolifically during this timeframe.

During this larger timeframe, other, less significant exchanges are also open in Shanghai and Hong Kong, although these are among the largest entities of their type in Asia. Along with the iconic Tokyo Stock Exchange, they also boast an annual trading volume in the region of $8 trillion, with this highlighting the sheer size of the Asian trading session and its potential for investors.

It’s also important to understand precisely when certain currency pairings are most widely traded in the Asian session, and you can achieve this by gaining real-time experience through a simulated demo account online.

What are the Optimal Strategies for Trading Forex During Asian Hours?

The latter point is a key strategic point of interest, and one that will determine exactly how and when you trade during the Asian session.

But what other strategic concepts should you give weight too? Well, if you look to operate as a scalper or day trader and execute a high volume of smaller orders during the session, your primary goal should be to target peak trading times where the levels of liquidity and volatility are at their highest.

In this particular case, there’s an hour’s crossover that encompasses the end of the unofficial Asian trading session (8am GMT) and the beginning of its European equivalent when the London Stock Exchange opens at 7am GMT.

These hours tend to see spikes in trading volumes and liquidity, especially for those of you who deal in the most relevant pairings such as the GBY/JPY or others that include the often unpredictable but incredibly popular Euro.

Conversely, the risk-averse traders among you may prefer to avoid such crossovers, instead timing your trades using more proactive market analysis and key events on the economic calendar. This enables you to avoid the small but frequent price shifts that occur during peak trading periods, making more long-term investment strategies such as swing or position trading far more viable over time.

It’s also important to retain a keen sense of determinism, which helps you to understand how certain currencies and pairs tend to behave during the Asian trading experience. This comprehension can be built through a combination of theoretical knowledge and practical trading experience, and once again, this is where a demo account can prove worth its weight in gold.

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