Home Courses Course-01 14 – Trading the Tokyo Session

14 – Trading the Tokyo Session

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Tokyo, the capital of Japan, comes under the Asian continent. The Tokyo session opens at 12:00 AM GMT (8:00 PM EST). Since Tokyo is the financial capital of Asia, the Tokyo session is sometimes referred to as the Asian session as well.

Did you know Japan is the third-largest trading centre in the world?

Talking about statistics, since the Yen is the third most traded currency, it bags 16.50% of all forex transactions. And, 21% of all forex transactions take place during this session.

For a day trader, what matters is the number of pips a currency pair moves during any session.

Below is the table which shows the average pip movement of some of the major currency pairs.

Currency pair Pips
EUR/USD 56
USD/JPY 30
AUD/USD 65
GBP/USD 54
NZD/USD 58
USD/CHF 40
USD/CAD 39
EUR/GBP 23
EUR/JPY 57
GBP/JPY 72
AUD/JPY 65

 

Things you should know before trading the Tokyo session

Though the session is termed as Tokyo session, it doesn’t mean that the market is moved only by Japan. There are tons of transactions coming from other countries like Hong Kong, Singapore, and Sydney as well.

Japan is one of the biggest exporters in the world. So, along with the central banks, there are exporters participating and moving the market as well.

Coming to the liquidity; during the Tokyo session, the market liquidity is sometimes thin. Also, most pairs start to move in a narrow range. This is the reason some traders do not preferably trade during this session. However, breakout traders prepare to take action in anticipation of a breakout during the close of the session.

Moreover, there are a set of traders who don’t trade in this session, but they analyze what happened in the Tokyo session so that they can take action in latter sessions when the liquidity is kicking in.

Which pairs should you focus on?

During the Tokyo session, news traders can concentrate and trade currencies like AUD, NZD, and JPY because this when the news for these currencies come in.

One can expect stronger moves in Asia Pacific currency pairs such as AUS/USD and NZD/USD compared to non-Asia Pacific pairs like GBP/USD.

Since the Japanese companies heavily deal with Yen, one can naturally, expect more movement in currencies paired with JPY.

China is a major trade player, just like Japan. So, whenever news comes out of China, it tends to inflate the volatility of the market. Moreover, since Australia and Japan rely on the Chinese demand, one can expect significant movement in AUD and JPY pairs when reports regarding it flash in.

Hence, this completes the lesson in the Tokyo session.

Now, you can take up the quiz below to grasp the concept better.

The Tokyo session is also referred to as

Correct! Wrong!

When does the Tokyo session open?

Correct! Wrong!

What percentage of transactions takes place during the Asian session?

Correct! Wrong!

What is the approximate pip movement of USD/CHF during the Tokyo session?

Correct! Wrong!

Market liquidity in Tokyo session is high.

Correct! Wrong!

In which type of currency pairs, one can expect strong moves?

Correct! Wrong!

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