Understand the basics with our interactive market course.
A day on the financial market is divided into global trading sessions: the opening hours of the largest stock exchanges in the world. They open during daytime hours in the respective time zone of each exchange.
A Trading day begins with the Pacific session, then the Asian one overlaps it; the London session takes over and finally the American one.
In the hours when sessions overlap, the quotes change particularly rapidly, due to increased volatility (i.e. more market participants).
When the Sydney stock exchange opens at the beginning of the week, it is still early morning in Tokyo, a Sunday evening in London, and a Sunday afternoon in New York.
Upon opening, asset quotes show a reaction to the events that occurred over the weekend. The behaviour of prices during this time is very difficult to predict.
Therefore, it is not recommended to leave positions open over the weekend. It would be much better to close them on Friday evening if you do not want to experience an unpredictable stop out caused by the gap in pricing over the weekend.
During the Asian session, the first significant news of the day is published: it concerns, first and foremost, Japanese data from Tokyo exchange.
The most active changes can be observed on the USD/JPY (US dollar vs Japanese yen), EUR/JPY (Euro vs Japanese yen) and AUD/JPY (Australian dollar vs Japanese yen) charts.
Other exchanges involved in the Asian session include Sydney, Singapore & New Zealand.
The London exchange is the main contributor to the European session and creates increased activity (volatility) on the market since its opening coincides with the closing of the trading day in Japan, and its closing hours include the start of the New York session.
Other exchanges such as Frankfurt and Paris also open during similar hours and therefore expand the EU session trading times.
Economic data from the Eurozone, UK, and Switzerland come out at this time.
Any changes in the indicators cause significant price fluctuations in pairs such as EUR/USD (Euro vs US dollar), GBP/USD (British pound vs US dollar), USD/CHF (US dollar vs Swiss franc), EUR/GBP (Euro vs British pound) and EUR/CHF (Euro vs Swiss franc).
The New York session overlaps with the end of the London trading period. This is a “hot time” in the market, in terms of high trading volume and dynamic price movements of the pairs with the US dollar.
During this time, traders follow the news from the United States, paying attention to the economic calendar. Changes are reflected in stocks prices, oil (Brent/WTI), gold and the USD currency rates.
It is also worth noting that the Russian session on the Moscow Stock Exchange captures both the London and the American ones. Here the focus of the investors’ attention is on news that may affect currency pairs with RUB (Russian Rouble).
Let’s recap the most important factors of this lesson: