Best Time To Trade The Tokyo Session

Best Time to Trade the Tokyo Session: A Guide for Forex Traders

Welcome to today’s lesson! In this session, we’ll explore the optimal time to trade during the Tokyo session, a crucial aspect of your journey toward achieving consistent profitability in the forex market.

Understanding the different forex trading sessions and their optimal trading times is essential. Many retail traders struggle because they don’t fully grasp how the market operates. Every trading session has its own unique characteristics and ideal times for identifying high-probability setups. Jumping into the charts without knowing what’s happening in the market is like sailing without a compass. It’s a risky move.

The “Sleepwalkers with a Profit Motive”

Those who trade the Tokyo session from outside Asia, particularly from North America, are often playfully referred to as “sleepwalkers with a profit motive.” That’s because for traders in the U.S., the forex week starts Sunday at 5:00 PM EST (10:00 PM GMT), but the real action doesn’t kick off until Tokyo opens a few hours later.

Tokyo Session Overview (Also Called the Asian Session)

In the forex world, the Tokyo session is commonly referred to as the Asian session. It’s known for its liquidity accumulation, which gets cleared when the London session opens. The Tokyo session officially begins at 7:00 PM EST (12:00 AM GMT), marking the start of forex trading in Asia.

The Japanese Yen (JPY) is the dominant currency in this session. In fact, it’s the third most traded currency globally, accounting for roughly 16.8% of all forex transactions. Japan itself is the third-largest forex trading hub, with about 20% of daily forex volume taking place during the Asian session.

And it’s not just Tokyo driving the volume. Other major Asian financial centers, such as Singapore and Hong Kong, play a huge role. Together, Singapore and Hong Kong account for 7.6% of global forex volume each, while Tokyo contributes 4.5%.

Best Time to Trade During the Tokyo Session

The most favorable time to trade during the Asian session is the overlap between the Sydney and Tokyo sessions, which runs from 7:00 PM to 2:00 AM EST (2:00 AM to 7:00 AM GMT). Why is this time important? Because volatility spikes and liquidity levels are higher due to the simultaneous activity of both sessions. This window offers high-probability trade setups.

Another key trading window is the overlap between the Tokyo and London sessions, which occur from 7:00 AM to 8:00 AM UTC. During summer months, this extends slightly to 9:00 AM GMT. During this overlap, consider trading pairs like GBP/JPY and EUR/JPY. However, be cautious to wait for the London session to sweep liquidity, as it typically clears previous highs and lows before choosing a direction.

Best Currency Pairs to Trade During the Tokyo Session

While you can trade any currency pair during the Tokyo session, certain pairs tend to show more volatility than others. The best pairs to focus on are:

JPY pairs
NZD pairs
AUD pairs

If you’re a beginner, avoid trading all of them at once. Focus on one pair at a time and wait patiently for clear setups. Not every moment offers an opportunity, so discipline is key.

If you prefer lower volatility and tighter price ranges, or if you’re focused on trading JPY pairs, the Tokyo session may suit you well. But if you thrive on high volatility, other sessions (like London or New York) might better match your trading style.

Key Characteristics of the Tokyo Session

Asia-wide Action: Activity isn’t limited to Tokyo. Major financial centers like Singapore, Hong Kong, and Sydney also drive significant volume.

Regional Currency Movement: Expect stronger moves in Asia-Pacific pairs like AUD/USD and NZD/USD.
Institutional Influence: The main participants include commercial companies (especially exporters) and central banks, as Japan’s economy relies heavily on exports.
Liquidity Building: The Tokyo session often consolidates, creating liquidity pools that are typically cleared during the London session.
Early Session Volatility: Most significant moves occur early in the session, coinciding with economic data releases.