More on the Tokyo Session.

Here is more on the Tokyo session.  Key characteristics that you should know include:

• Action isn’t only limited to Japanese shores.  Many forex transactions made during the Tokyo session occur in other financial hot spots like Hong Kong, Singapore, and Sydney.
• The main market participants during the Tokyo session are commercial companies (exporters) and central banks.  Remember, Japan’s economy is heavily export-dependent.  And, with China also being a major trade player, there are a lot of transactions taking place on a daily basis.
• Liquidity can sometimes be very thin. There will be times when trading during this period will be like fishing.  You might have to wait a long, long time before getting a nibble.
• It is more likely that you will see stronger moves in Asia Pacific currency pairs like AUD/USD and NZD/USD as opposed to non-Asia Pacific pairs like GBP/USD.
• During those times of thin liquidity, most pairs may stick within a range.  This provides opportunities for short-term day trades or potential breakout trades later in the day.
• Most of the action takes place early in the session when more economic data is released.
• Moves in the Tokyo session could set the tone for the rest of the day. Traders in the latter sessions will look at what happened during the Tokyo session to help organize and evaluate what strategies to take in other sessions.
• Typically, after big moves in the preceding New York session, you may see consolidation during the Tokyo session.

Which Pairs Should You Trade?

Since the Tokyo session is when news from Australia, New Zealand, and Japan comes out, this presents a good opportunity to trade news events.

Also, there could be more movement in yen pairs as a lot of yen is changing hands as Japanese companies are conducting business.

Take note that China is also an economic superpower, so whenever news comes out from China, it tends to create volatile moves.

With Australia and Japan relying heavily on Chinese demand, we could see greater movement in AUD and JPY pairs when Chinese data comes in.

Tomorrow, let’s check out how you can trade the London session.

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