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The Foreign Exchange Rate Session System

Foreign Exchange Rate

The Foreign Exchange Rate Session System

One of the attractive points of the forex market is that it has a 24 hour open time.  This 24 hour open time runs from Monday to Friday every week of the year.  When you are trading on the market you need to break this long open period into easy to work with sessions.  This has actually been done for you as there are 4 different market sessions in a day.  It is important that you know what these market sessions are and how they affect your trading.  Trading with a foreign exchange rate market session system is what a number of traders look at.

The Foreign Exchange Rate Market Sessions

Before you can look at the market session system you need to know what the market sessions are.  There are 4 sessions that cover the major trading hubs in the world.  Each of these hubs trade at different times making it easy to divide the day into four parts.

It is important that you know when the market session open in your local time.  You should also be aware of the overlap times of the market.  The most volatile and liquid of these overlaps is the London and New York overlap.

What the Sessions Mean

Each market session covers the trading times of a geographic region, but many traders do not consider how this affects them.  Retail traders are affected by market sessions because of the way currency pairs are traded during the different sessions.  There are certain sessions where one currency pair is traded more than any other.  If you are going to trade that currency pair you need to know when it is most liquid and when it is most volatile.

You should also consider the fundamental implications of the market sessions.  If you are trading the US dollar then you need to pay attention to the New York market session.  During this time the US dollar is traded the most because the US traders are online.  However, this is also when fundamental news releases come about because it is the US business day.

Using the Market Session System

When you start trading you have to consider the market session system.  This system takes advantage of what the different market sessions have to offer.  It is recommended that you implement this system with every strategy you are looking at.  Of course, there are some strategies that do not benefit from this system and they are generally the long-term strategies.

Long-term strategies do not benefit from market systems because of the length of time the trade is open.  All long-term trades will cover a number of trading sessions as they are held for a number of days.  Some long-term traders implement the market system to determine which session they should open a trade in.

Short-term trading benefits the most from the market session system.  As you do not hold trades for very long you need to trade in the right market conditions.  If you are trading the US dollar on a strategy that requires high volatility you should look at the London/New York overlap session.  This session sees the most trading for UD dollar pairs and has the highest market volatility.  The market session system is essentially finding the market session that best suits your trading strategy and currency pair.

 

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