Characteristics of Tokyo Trading Sessions
You should note that the Tokyo session is sometimes referred to as an Asian session because Tokyo is the financial capital of Asia. One thing to note is that Japan is the world’s third largest forex trading center.
Here are some key characteristics you should know about the Tokyo session:
- Action is not confined to the coast of Japan. Millions of forex transactions are conducted in other financial financial places like Hong Kong, Singapore and Sydney.
- Major market participants during the Tokyo session were commercial companies (exporters) and central banks. Remember, Japan’s economy is very dependent on exports and as China is also a major trading player, there are many transactions that happen every day.
- Liquidity is sometimes very thin. There will be times where trading during this period will be like fishing – you may have to wait a long time before biting.
- Most likely you will see stronger moves in the Asia Pacific currency pair such as AUD / USD and NZD / USD compared to non-Asia Pacific pairs like GBP / USD.
- During a period of thin liquidity, the pair is most likely to stay within range. This provides an opportunity for short day trading or potential runaway trade in the future.
- Most of the action took place early in the session when more economic data was released.
- Moving in Tokyo session could set the tone for the rest of the day. The traders in the final session will see what happens during the Tokyo session to help organize and evaluate what strategies should be done in other sessions.
- Usually, after the big moves in the previous New York session, you may see consolidation during the Tokyo session.
There are several trading strategies that can be used to achieve profit by utilizing tokyo trading session, such as Trading News and Breakout. If the pips range throughout the Tokyo session is no more than a pips, you can use a breakout strategy in the next trading session.