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Trading the Tokyo Session: A Guide for Forex Traders

Tokyo financial hub

The Asian trading session is one of the best time of day to trade forex, as explained in the DailyFX Traits of Successful Traders series. Also known as the Tokyo session, the Asian trading session is often overlooked as it is not as liquid and volatile as other major trading sessions; but these characteristics are exactly what makes the Asian session attractive to those who know how to trade it.

This article will walk through the nuances of this trading period – listing the Tokyo forex market hours and providing ideas and strategies for traders to consider when ‘Trading Tokyo’.

What are the Tokyo forex market hours?

The Asian forex session starts off the trading week on a Monday morning at 09:00 and closes at 18:00 in Japanese Standard Time (JST). In London, traders will have to be up at 00:00 (GMT) in the early hours of the morning until 09:00 (GMT) if they wish to follow the Asian session in real time.

Keep in mind that the FX market trades 24 hours a day, so official starting times are subjective. But it is generally accepted that the Asian session begins when Tokyo banks come online due to the volume of trades they facilitate. New Zealand and Sydney, Australia are technically the first, reasonably sized, financial hubs to start the trading day.

Below is a summary of the different times traders will be able to trade the Asian session in their respective time zones:

Asian trading times in major trading locations

Trading location

Major market

*Hours (in local time)

Asia

Tokyo

09:00-18:00 JST

Europe

London

00:00-09:00 GMT

United States

New York

19:00-04:00 ET

*These times are subject to change with daylight savings changes

Major economic centres in Europe and the US are not at work for the majority of the Tokyo session, which contributes to the thin trading volumes experienced.

Top 5 things to know about the Tokyo session

The Tokyo forex session is typically known to adhere to key levels of support and resistance due to the lower liquidity and volatility experienced. The Asian session is characterised by:

  1. Low liquidity
  2. Low volatility
  3. Clear entry and exit levels
  4. Ideal for sound risk management
  5. Breakout trade opportunities after the close

1) Low liquidity

With lower liquidity, non-Asian markets such as EUR/USD,GBP/USD and EUR/GBP are less likely to make large moves outside of generally observed trading ranges. The chart below shows this effect with the Asian session depicted in the smaller, blue boxes, while the London session and US session are depicted in the larger red boxes.

Lower liquidity in the Asian trading session keeps price action in a channel

2) Low volatility

Because the primary liquidity coming into the market is from Asia, movements – in general – can be quite a bit smaller than what will be seen during the London or US sessions. The image below provides an indication of how volatile currencies can be throughout the day. The chart shows higher peaks (more volatile movements) outside of the Asian session.

EUR/USD as a proxy for volatility

average pip movements in EUR/USD across the major trading sessions

Source: DailyFX Traits of Successful Traders research (2010-2012)

3) Clear entry and exit levels

Levels of support and resistance assist traders with opportunities to enter or exit trades. Combining this with signals from indicators further increase the probability of entering a good trade.

4) Ideal for sound risk management

The quiet nature of the Asian session may allow traders to manage their trades better. The slow nature of the market can potentially allow for more thorough analysis of risk and reward. Essentially, it is easier for traders in the Asian session to spot levels of support and resistance as they are generally well-defined and coincide with the trading range.

5) Breakout opportunities after the close

As the Asian trading session comes to an end it overlaps with the start of the London session. More liquidity instantly becomes available and traders often witness breakouts from established trading ranges.

What currency pairs are best to trade during the Tokyo session?

The best currency pairs to trade during the Tokyo session will depend on the individual trader