The forex trading session is extremely important, no matter what method you trade, it is important to know the trading session well.
The forex trading session is important, because of the following reasons:
1. Trading session determines trading volume: This is the key factor that determines the direction of price movement. As we all know, price is determined by supply and demand, and trading volume is the expression of supply and demand. The trading volume also shows us which price areas have "severe contention" between buyers and sellers. Trading volume also tells us "trace of giants" - that is, price areas with the participation of major financial institutions in the market (banks, large investment funds, ...) . In other words, volume is the vanguard that guides us in the right direction.
Note: The job of retail traders like us is simply to correctly predict the direction of the "giants", then follow them.
Read more: 22 Volume Patterns In Technical Analysis
You may notice these things happening frequently, cyclically (repeatedly):
+ Asian session: The trading volume is low, the price moves less with large fluctuations, usually moves in one direction.
+ European session: Relative trading volume, price fluctuations but not too large.
+ The Americas session: The trading volume is large, even very large, with strong price fluctuations that are difficult to predict. Usually, the market will announce important news in the American session (eg news about Fomc, Nonfarm, interest rate, ...)
2. The trading session reflects the psychology and behavior of investors in the market: In fact, each trading session reflects the psychology and behavior of investors in that session. In other words, the psychology of investors in a trading session will usually not conflict, but the conflict often occurs between trading sessions.
This may seem a bit difficult to describe, for example the following 2 cases you will often see:
- When the US session, the price moves strongly in one direction, at the beginning of the Asian session, the price will usually have a correction (in contrast to the US session).
- The European session will usually continue with the main trend.
- The above happens many times, and we will rarely see a strong pullback in the Asian session. This is partly due to the low trading volume of the Asian session, and the other reason is because investor sentiment in the Asian session is quite homogenous.
3. The trading session contains the cyclical element of the market: Obviously, each trading session has different volume levels, different investor behavior and psychology. But, the trading time of each trading session is fixed (right time frame, right time opens the session, and right time closes the session), so the trading session has a cyclical element.
All phenomena in this universe are cyclical, so is the world economy, so is the economy of countries, and of course the forex market is no exception. Therefore, the cyclical factor needs to be focused when analyzing and forecasting prices, in forex investment and trading.
Based on the above 3 factors, it is clear that the trading session will greatly affect our forex trading strategy, which in turn will affect the trading results, our failure or success.
Of course, the forex trading session is very important!
Above is my share about the role of the trading session in the forex market. Thank you for reading and sharing the article.
Best regards,
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