Characteristics of the Tokyo Trading Session and Best Trading Strategies

Tokyo trading session is one of the first major trading sessions in the global foreign exchange market 

1. Opening hours of the Tokyo trading session 

• Opening time: 00: 00 GMT
• Closing time: 09: 00 GMT

2. Characteristics of the Tokyo trading session 

• Lower volatility: Compared to the London or New York trading sessions, the market volatility during the Tokyo trading session is lower. This is because the European and American markets have not yet opened, resulting in relatively low trading volume. Nevertheless, this may be an advantage for traders who prefer low-volatility markets.
• JPY-related currency pairs: Due to Tokyo's dominance in the market, JPY-related currency pairs are active during this time. Typical trading pairs include USD/JPY, EUR/JPY, and AUD/JPY.
• Overlap with the Sydney market: The Tokyo session overlaps with the early part of the Sydney market for several hours, making the volatility of the Australian Dollar (AUD) and New Zealand Dollar (NZD) relatively active during this time.
• Slower market reaction: Due to the relatively low trading volume during the Tokyo session, the market's reaction to global economic data or news events may be slower, providing a relatively stable trading environment.

3. Major currency pairs 

• USD/JPY: This is one of the most traded currency pairs during the Tokyo trading session. The volatility of the Yen is influenced by Japanese economic data, Bank of Japan policies, and sentiment in the Asian market. As Tokyo is the core market for Yen trading, this currency pair has high liquidity during this session.
• AUD/JPY: Due to the overlap between the Tokyo and Sydney sessions, AUD/JPY is active during this time. This currency pair is closely related to Commodities prices, so fluctuations in Commodities prices will also affect its trend.
• EUR/JPY: As another active Yen pair, EUR/JPY also has good trading volume during the Tokyo trading session. This currency pair is influenced by both sentiment in the Asian market and the economic situation in Europe.
• AUD/USD: The trading volume of the Australian Dollar against the US Dollar is relatively high during the Tokyo trading session, especially when Australian economic data is released or Commodities prices fluctuate, increasing the volatility of this currency pair.

4. Best strategies for the Tokyo trading session 

1. Range trading: Due to the lower volatility of the Tokyo session, market prices often fluctuate within a narrower range. Range trading strategies are suitable for this time, allowing traders to buy and sell based on support and resistance levels to profit.
2. Focus on the Asian market: The Tokyo trading session typically reflects the economic conditions of Asia, so economic data or news events that significantly impact the Asian market may trigger short-term volatility. Closely monitoring economic data from Japan, Australia, and China, such as Japan's GDP, inflation rate, or Australia's trade data, can help you seize trading opportunities.
3. Breakout strategy for JPY-related currency pairs: Although the volatility during the Tokyo session is low, there are occasional breakout trends in the market, especially among JPY-related currency pairs. After a period of consolidation, prices may suddenly break out following the release of specific economic data or significant news events.

5. Advantages and challenges of the Tokyo trading session 

• The low-volatility market provides a relatively stable trading environment, suitable for novice traders and those who prefer low-risk strategies.
• The activity of JPY-related currency pairs offers diverse trading opportunities, especially when market sentiment is clear.
• The overlap with the Sydney market allows you to focus on both the Asian and Australian markets simultaneously.

• Relatively low volatility means smaller price movements, which may not be suitable for short-term traders seeking significant fluctuations.
• Trading during the Tokyo session may result in slower market reactions, potentially delaying the execution of some trading strategies.

Conclusion