Trading the Asian Forex Session

Hey there, forex enthusiasts!

In this blog article, we’ll explore the unique characteristics of the Asian Forex Session. What’s in store for you is what are the best currency pairs to trade.

On top of that, we’ll also share with you some top-notch strategies — to trade better in this dynamic market period.

So, let’s get started!

Asian Forex Session’s Characteristics

The Asian Forex Session kicks off the trading day — by setting the tone for the markets. It’s a beast of its own (bulls and bears).

This session comes with distinct features. And it set itself apart from its European and American counterparts. Let’s break it down:

1. Timing: The Asian session typically runs from 11:00 PM to 8:00 AM GMT. The session covers major financial centers like Tokyo, Singapore, and Sydney.
2. Lower Volatility: Compared to the London and New York sessions, the Asian Forex Session often experiences lower volatility. This can be both a blessing and a curse — depending on your trading style. (Day, scalp, swing or long tern trader?)
3. Tighter Spreads: It’s where major banks and financial institutions are active during this time. Thus, you’ll often find tighter spreads on popular currency pairs.
4. News Sensitivity: Economic releases from countries like Japan, Australia, and China can significantly impact the market during this session.
5. Range-Bound Trading: Due to lower volatility, many currency pairs tend to trade within a range during the Asian session.

Understanding these characteristics is crucial. Why so? It’s for you to develop effective trading strategies tailored to the Asian Forex Session.

Best Currency Pairs to Trade During the Asian Session

Not all currency pairs are created equal. It’s holds true — especially during the Asian session. Here are some of the top pairs to keep an eye on:

1. USD/JPY: The “ninja” pair is the obvious choice for the Asian session. Japan is a major player in the region. Therefore, this pair often sees significant action.
2. AUD/USD: The “Aussie” is heavily influenced by Chinese economic data and commodity prices. This makes it an interesting pair to watch.
3. NZD/USD: The “Kiwi” is sensitive to developments in the Asian markets. (Similar to its Australian cousin.)
4. EUR/JPY and GBP/JPY: These cross pairs can offer excellent opportunities. It occurs especially when there’s significant news from Europe or the UK.
5. AUD/JPY: This pair combines the Aussie’s volatility with the Yen’s stability. It often results in interesting price action.

Remember: These pairs are generally good choices. But you must always keep an eye on current market conditions and adjust your strategy accordingly.

Effective Strategies for the Asian Session

Now, let’s discover some powerful trading strategies to capitalize on Asian Forex Sessions.

1. Range Trading:

Asian forex sessions usually offer range-bound movements. So, a simple yet effective strategy is to identify support and resistance levels and trade the bounces.

Here’s a quick example of how a range trading strategy might work:

Let’s say you’ve identified a range in USD/JPY between 108.50 and 109.00.

• You decide to buy 1 lot (100,000 units) at 108.55.
• Your stop loss is at 108.45 (10 pips below entry).
• Your take profit is at 108.95 (40 pips above entry).

If the trade hits your take profit, you’ll make:

40 pips x $10 per pip = $400 profit

If it hits your stop loss, you’ll lose:

10 pips x $10 per pip = $100 loss

This gives you a risk-reward ratio of 1:4 (It’s generally considered favorable.)

2. Breakout Trading:

While ranges are common, when they break, they can lead to significant moves. Therefore, you need to keep an eye out for key levels. Of course, get ready to jump on breakouts.

A simple way to do this is — by setting alerts just above and below the range.

3. News Trading:

Major economic releases can cause quick spikes in volatility.

For instance:

If the Bank of Japan (BOJ) announces an unexpected change in monetary policy, you could see a sharp move in JPY pairs.

Always be aware of the economic calendar. Also, you need to have a plan for high-impact news events.

4. Carry Trade:

The Asian session can be an excellent time to implement carry trades. It works by taking advantage of interest rate differentials between currencies.

For example:

You might consider going long AUD/JPY. The purpose is to benefit from Australia’s typically higher interest rates compared to Japan’s.

5. Correlation Trading:

Many Asian currencies are correlated with commodity prices.

For instance:

AUD often moves in tandem with gold prices. By keeping an eye on these correlations, you can potentially predict currency movements.

Remember: The key to success in forex trading, regardless of the session, is continuous learning and adaptation.

The Asian session might be quieter than its counterparts, but it’s far from dull.

Happy trading! And may the pips be ever in your favor!