Know the clock
If you have been reading and researching how to be a successful forex trader and have come across information that there is massive trading volume during an overlap, you might be correct, but it is not always the case. If you think that overlap is the best time to trade, we have to let you know more as some overlaps are not always ideal times.
What happens when the Asian/ Tokyo trading session and European/ London trading session are both open?
Some traders might think that overlaps are always loaded with massive trading volume, but it is not always the case. Let us take the London and Tokyo trading session overlap as an example. There is significantly less movement in this session, especially when during the afternoons of an Asian trading session. Together with this fact, afternoons in the Asian trading session are simultaneous when Europeans get ready for work. Due to this reason, liquidity tends to be very dry.
Suppose you are here to research and know more about the best time to do forex trading. In that case, this overlapping time might not be the best time for liquidity and volatility as there are less movement and activity. However, you might want to read about our next topic below.
What happens when the New York/ North American trading session and European/ London trading session are both open?
The European and North American trading sessions are two of the most massive financial centers. With that being said, when these two trading sessions overlap and both active, the trading volume and transactions can be a handful. It is around 10:00 in the morning in New York and 3:00 in the afternoon in London.
Traders from North America and Europe are busiest at this time. They make the most significant moves after the press release, and data involving the economy and politics of the US and Canada comes out.
Sometimes, Europe also releases news like this that impacts the market. There are also times when trends develop in the European session that tend to continue. Why? American traders make up their minds to build their position after learning about the events before the trading day's start.
It is also good to know that the London and New York trading session overlap determines the spot benchmark rate at 4:00 in the afternoon, London time.
We may see a fluctuation before noon in the US when some Europeans close position towards the end of the day.
The London fix and currency fix in general
We have mentioned that the spot benchmark rate is 4:00 in the afternoon, London time. We can also call it the London fix. And when we say fix that involves currency, we are talking about a specific time of the day where currency price and commercial transactions are set.
Currencies do not stagnate
as they change almost every second; that is why we need a basis or a reference
point. If you recall the last time you went to the bank, you might have noticed
that they use a daily rate to fix their currency exchange rates. They use this
in determining prices in corporate forex transactions. A daily fix may witness
a swift trading movement that lasts anywhere from 15 to 30 minutes before the
fixing time. Moreover, this will go away eventually at the fixing time.
