American traders looking to trade during the Tokyo session will want to be near their computers when the clock strikes 5pm EST on Sunday night. That said, the trading during that time is going to be incredibly light. The volume isn’t there because while the session is technically open, the banks and others who do business in Asia are not open to trading until 12:00am GMT.
Japan represents the third-largest trading market for foreign currencies in the world. It only trails behind New York and London. The Yen itself is a highly traded currency representing just under 1 in 5 trades conducted on the currency markets.
The Tokyo Session (also known as the Asian session) makes up about 20% of the trading activity in any given 24-hour period. That means that it is not nearly as active as the New York or London sessions, but there are still many interesting opportunities for savvy traders to take advantage of. Besides that, it is nice that there is a trading session available to those who may work off hours that don’t allow them to trade during the earlier sessions.
There is a lot of trading that happens in Hong Kong and in Singapore as well as in Tokyo, so the idea that the session should be called the Asian session perhaps makes more sense than strictly limiting it to the Tokyo session.
You might be interested in seeing typical moving averages (in pips) for different currency pairs during the Asian session. The movements between these currencies during this period of time are something for you to pay careful attention to. It is illuminating in terms of how much volatility one can expect to see in a given trading session.
Average Pip Ranges During the 3 Forex Sessions
These averages are helpful for getting a sense of what a typical day might look like in the Tokyo session, but keep in mind that various market conditions can have a material impact on the outcome. There are scenarios when the liquidity isn’t as free-flowing, and that can result in tighter movements between the currencies. Always remember to check the calendar for national holidays celebrated throughout Asia before you begin to trade in this session. If a major trading hub happens to be located in an area that is celebrating a holiday, then the liquidity can dry up in a hurry.
Pairs Worth Trading in The Tokyo Session
The average new Forex investor will want to know which currency pairs they should focus their trades on in a given session of trading. Obviously, they will want to trade in pairs that have the most liquidity so they can attempt to capture as much of the market movements as they possibly can. That is why they should look at pairs that are geographically relevant to the session that they are looking to trade. For example, it makes sense to trade in the Australian Dollar, the Yen, and the New Zealand Dollar (also known as the Kiwi) during the Tokyo session. Those are the currencies that people in that part of the world are most interested in, and it just makes sense that one might want to capture some of the volatility that they have to offer during these sessions.
One last note is that this session leans heavily on data released from China. Keep a close eye on the data that comes out of that country when trading in this session to see the facts and figures that will have the largest impact on pairs that tend to move in the Tokyo session.