Tokyo Forex Trading Session

On the last page we gave you a brief overview of the three major trading sessions that make up the international foreign exchange market. In this article, we’ll explain the characteristics of the Tokyo trading session, and what investors should know about this very important market.

The 6 Things You Need to Know about Tokyo:

1. Commercial traders make up more volume in the Tokyo market than they do in any other. Because Hong Kong, Sydney, and other major exporting areas are trading alongside Tokyo, many manufacturers are selling their foreign currency for local currency.
2. Commodity prices (oil, food, wool, etc.) are very important to Tokyo since major commodity producers like Australia and New Zealand are buying and selling currencies.
3. Tokyo can set the stage for the next day. A big movement in Tokyo may trigger similar buying and selling action later by European traders, and later by Western-world (North and South American) traders.
4. Pairs that include AUD or JPY are usually most active during this trading session. The dollar, the largest component of the foreign exchange market volume, is often traded with each of these currencies in the AUDUSD, and USDJPY pairs.
5. Early trading can be wild. Since Tokyo is the first market to start a new trading day—and also the first market to kick off a trading week—there is often pent-up demand for currency trades that were thought up over the weekend. As a result, the first hour of Tokyo trading can be very volatile, but also enormously profitable!
6. Tokyo often corrects New York’s overbuying and selling. If US trading sessions create big moves in a particular pair, the move may reverse in the following Tokyo session.

Recap: Tokyo is a very important trading session, and one that cannot be ignored because of its power in setting the mood for the remaining trading sessions. This trading session is full of movement, since several manufacturing and commodity-producing nations—China, Japan, and Australia—make up much of the action in this market.