Forex trading is available on a 24/5 schedule. However, not all hours of the day offer the same degree of liquidity as others. Three unofficial core trading sessions exist in forex markets – London, New York, and Tokyo. These sessions open at different parts of the day due to time zone differences. The Tokyo session is characterized by market activity from across the Asian markets. The session hours briefly overlap, making the markets more liquid and active.
Tokyo session definition
The Tokyo session is one of three major forex trading sessions. The session takes place between 11 pm and 8 am GMT. The Tokyo session includes countries that are many time zones apart from each other and extended hours for the session are not uncommon. Tokyo trading sessions are more liquid than Sydney but Less liquid than London and New York sessions.
Why it is important for traders to understand the Tokyo session
- Some hours of the day get more liquidity and trading volume than others
- High liquidity provides tight spreads, which is important for successful forex trading
- Markets experience high liquidity during short periods when Major sessions overlap
The Tokyo session in more detail
Forex is a decentralized market, which means that trading currency pairs takes place in various exchanges. Tokyo trading session is one of the main global financial centers.
The session includes large markets such as China, Japan, South Korea, etc. The session overlaps mainly with the pacific sessions: Sydney and Wellington. The Tokyo session overlaps with the London session briefly during morning hours, which leads to a notable increase in liquidity and trading activity.
Tokyo session example
The overlap between Asian and European markets happens at 8 am GMT. The inflow of capital raises liquidity, which in turn leads to tighter spreads for traders.
By this point through the session, traders have had the time to digest market news coming from the previous day and start trading off the back of fresh market data.
The results of the previous trading day feeds into the next and early morning trading can see larger volumes due to this overlap. The London trading session is the most liquid.
FAQs on the Tokyo session
When does the Tokyo session start?
The Tokyo forex session starts from 11pm and concludes at 8 am GMT. The session collides with the London session at 8 am GMT, which leads to higher trading activity and a liquid market.
What are the forex trading sessions?
There are three unofficial major forex trading sessions: Sydney, Tokyo, London and New York. These sessions divide the forex trading day into three core parts to reflect the effect of time zone differences on the market.