The currency market is constantly fluctuating, attracting a large number of investors worldwide with the sole purpose of making money. The rate of these fluctuations varies due to geography and, hence, the number of participants at a particular time. This article will explain the different trading sessions and the best time to trade foreign exchange (forex or FX) in Singapore.
The Different Forex Trading Sessions
The FX market operates 24/5 and is divided into trading sessions by geographical area. These timings may vary slightly due to general overlaps and daylight-saving time changes in different regions. According to Singapore time (GMT+8), main trading hours during these sessions are as follows:
- Sydney Session
Operating hours: From 5:00 am to 2:00 pm
- Tokyo session
Operating hours: From 8:00 am to 5:00 pm
- London Session
Operating hours: From 3:00 pm to 12:00 am
- New York Session
Operating hours: From 8:00 pm to 5:00 am
Characteristics of the Different Trading Sessions
Below are some of the characteristics and opportunities of each forex trading session:
Asian Trading Session
The Asian trading session, which runs from 5 am to 5 pm (GMT+8), is a combination of the Sydney and Tokyo markets. The Tokyo session overlaps with the Sydney session (8 am to 2 pm), creating an exciting period when the Tokyo stock market is highly active. The Asian trading session is the opening session for the forex trading day and is usually more stable than other sessions in terms of fluctuations. However, it may also fluctuate due to new information received after the U.S. market closes. It is characterized by low price volatility and poor liquidity and is more suitable for longer time frame trading.
London Trading Session
This is where the majority of global forex transactions take place. The London trading session — also called the European trading session — is characterized by high price volatility and high liquidity due to overlap with the Tokyo and New York sessions. This makes it suitable for trend traders and short-term traders such as Scalpers. However, there can be unpredictable price fluctuations, making technical analysis and risk management indispensable tools.
New York Trading Session
This is the last session of the day, often with high fluctuations due to economic news from the U.S. This session is more suitable for experienced traders using short-term trading strategies and those trading on economic news.
How To Maximize Profits During Different Trading Sessions
1. Use Technical analysis
Use indicators such as the Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and moving averages to spot trends and seek out signals to buy or sell. For instance, employing a Simple Moving Average (SMA) can aid in recognizing when a currency starts to trend upwards or downwards. This approach works in periods of volatility, like during the London and New York trading sessions.
2. News-Based Strategy
Economic and political developments significantly influence the value of currencies during every trading period. Traders should stay updated with platforms like TradingView to seize favorable trading opportunities as the market responds to news, particularly during the New York trading session.
3. Understand Each Trading Session
Each trading session has its unique characteristics. The Asian session is less volatile than the New York session, which is known for its high levels of volatility. Traders often implement hedging and diversification tactics at different moments, like purchasing assets during the Asian session and considering selling or hedging during the turbulent New York session when prices are highly volatile.
How To Choose the Best Time To Trade
Choosing the best time to trade is one of the most critical decisions in your trading because it determines your profit and investment strategies. To do this, Investors need to determine:
- Your time: If you have a full-time job, you will be restricted to trading after your working hours.
- Time frame: Long-term or short-term investment goals will affect the choice of the appropriate trading session. As stated above, London and New York trading sessions experience more volatility, which affects your trading goals.
- Risk tolerance: Analyze your risk tolerance to know which session is more suitable for you.
- Trading experience: Your overall experience already tells you how you want to trade. Newbies should use demo or paper trading features to try their hands on different styles and markets.
- Currency pair: Your preferred currency pair will enjoy more liquidity when the trading sessions of the currencies overlap. For instance, AUD/JPY has a higher trading volume from 8 am to 2 pm (GMT+8) when the Sydney and Tokyo sessions overlap.
- Risk management: This should be a priority regardless of your chosen trading session. However, each market requires a unique approach to managing risk. For example, long-term trading strategies require a wider stop-loss order than short-term trading strategies.
The Best Time To Trade Forex in Singapore
The best time to trade forex in Singapore is 3 pm to 12 am (GM+8). The time overlap between the London trading session and the Tokyo and New York sessions provides many trading opportunities due to strong price fluctuations. The spread, which is the difference between the ask and bid price, is also low due to increased liquidity during this period. This time is significant because it includes hours outside of business hours in Singapore.
Mondays and Tuesdays are also crucial for traders because there are strong price fluctuations during these days as the market reacts to events and economic data released at the end of the previous week.
Whatever time you choose to trade, there’s always one trading session open. However, it’s not a good idea to trade when liquidity is low. When two sessions overlap, the number of traders significantly increases, thereby increasing liquidity. The FX market experiences the highest trading volume when the London and New York trading sessions overlap, with over 50% of the total trading volume.
Strategizing Trading Hours for Profitable Forex Trades
Different times of the day can influence your trading profit and strategy. Traders should choose trading periods with higher liquidity for reduced spreads but make sure their trading strategy aligns perfectly with those periods. If you’re a forex trader, remember to stick to your preferred strategy and try not to listen to the noise that may upset your rhythm. Happy trading!