Trading Session

Updated on April 4, 2024
Article byPriya Choubey
Edited byPriya Choubey
Reviewed byDheeraj Vaidya, CFA, FRM

What Is A Trading Session?

A trading session refers to the daytime hours during which trading activities occur in a particular financial market at a certain location. Hence, it is the peak time when the market is open to exchange securities. These trading hours vary in different markets and locales.

Trading Session

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Hence, the financial market or exchange is closed before and after the trading session. As we know, the financial markets facilitate trading different types of securities, including stocks, bonds, forex, and derivatives. All these assets have distinct traits that influence the respective market’s trading session.

Key Takeaways

  • A trading session is the peak hours of the day during which a financial market is open to exchange assets.
  • The trading hours vary with the locations, markets, and asset classes. Thus, the forex, stocks, bonds, and derivatives also have different exchange hours.
  • A forex market is open throughout the day and night, I.e., for 24 hours, but the trading activities are performed during specific hours only.
  • The trading in the forex market hours is based upon the four major trading sessions worldwide, including the New York, London, Tokyo, and Sydney sessions.

Trading Session Explained

A trading session is the time of the day when the market is open to exchange assets. The different locales and markets have different trading hours. Also, a market’s opening and closing times vary with the asset classes being traded. Every country has a different session timing due to their varying time zones. However, most sessions worldwide are open from Monday to Friday and remain closed on the weekends.

The prices of assets and securities often fluctuate as the market opens or closes. This is because business news or announcement frames the trading strategy of the traders. Thus, investors, traders, and other market participants must be alert to the trading session to profit from their trading activities through proper planning.

A forex or foreign exchange market is highly volatile, and it aids in trading currency pairs during the time frame when two or more sessions overlap. The traders can adopt the strategies like support and resistance or breakout to benefit from the currency exchange at the time of overlapping. For instance, the traders can buy or sell the European currencies at the support or resistance point when the US and Asian sessions overlap.

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Four Trading Sessions

Earlier, there were three main trading sessions, i.e., – the North American session, the European session, and the Asian session. However, the markets are currently said to be most active during the trading sessions of the four largest financial cities. Although the forex session time is open 24 hours, the traders cannot exchange assets all day. They exchange the currencies, securities, or assets only during the peak hours, i.e., during the following four prominent trading sessions.

#1 – The New York Session

Another name of the New York session is the North American session, which opens at 8 am EST and closes at 5 pm EST every Monday to Friday. This session experiences a busy schedule in the early hours when the London session opens and overlaps the New York session.

Also, during this time frame, most of the business news, events, and announcements take place, which results in an accelerated exchange among the traders. The US dollar is the forex market’s most influential and traded currency. The market liquidity and volatility decline as the session is about to close. The currency pairs traded here are EURUSD, USDCHF, GBPUSD, USDCAD, etc.

#2 – The Sydney Session

The Sydney session opens at 3 pm EST and closes at noon from Monday to Friday. This session has thin liquidity while there is widespread trading of the currency pairs. The maximum exchange takes place during the early phase of the session. The most suitable strategies for traders here include position trading, swing trading, scalping, and day trading.

#3 – The London Session

Also known as the European trading session, the London session is the largest forex session in the world that experiences 32% of the overall trading activities. It begins at 3 am EST and ends at 11 am EST during all the weekdays. Moreover, it is one of the most liquid and volatile sessions where the traders profit most from successful currency pairs like the Euro/Pound pair.

#4 – The Tokyo Session

The Tokyo session begins at 7 pm EST and ends at 4 am EST every weekday. It is the period when most of the Asian trading activities take place. It is also Asia’s first trading session. The liquidity is seen only after some time of the session opening. Thus, the Tokyo session marks low volatility and liquidity while providing breakout trade opportunities as the market closes. Therefore, the stock prices during this session usually combat the support and resistance levels.

However, the sessions often overlap with one another. Such overlapping schedules occur when most leading institutions, banks, traders, and retail investors are active. Thus, maximum trading takes place in this period.

Examples

Check out some of the common examples:

ExchangeMarket PlaceTrading Session (EST)Trading Days
Dubai Financial MarketDubai10.00 am – 3.00 pmMonday to Friday
NZX Debt MarketNew Zealand9.00 am – 4.45 pmMonday to Friday
New York Stock Exchange (NYSE)New York, US9.30 am – 4.00 pmMonday to Friday
Toronto Stock Exchange (TSX)Toronto, Canada9.30 am – 4.00 pmMonday to Friday

Pre And Post Trading Sessions

The pre-trading or pre-market is a time window before the beginning of a trading session of the day to plan or book orders in advance. It helps to reduce the volatility of the price movement of stocks as the market opens for trading. Thus, in the pre-market session, the orders are limited, confirmed, modified, or canceled beforehand. And the confirmed orders are executed as the market opens.

The US stock market is open from 9.30 am ET to 4.00 pm ET; however, the pre-trading session is from 4.00 am to 9.30 am. Similarly, the post-market, post-trading, or after-hours trading session is the time window available after the closing of the regular session. It is from 4.00 pm ET to 8.00 pm ET in the US stock market.

These time frames are essential because any announcement or financial news about a company or asset declared during the non-trading session can result in the crashing or sky-touching of the relevant asset price as soon as the market opens or closes. In other words, it allows time for the investors and traders to react to positive or negative information instantly and controls the market fluctuations based on such reactions.

The Securities and Exchange Commission (SEC) has stated the following risk factors concerning the pre and post-market sessions:

  1. Limited Liquidity: As the after-hours trading session is accessible by only a handful of traders, the liquidity is much lower than during regular trading hours.
  2. Uncertain Price: The stock prices may significantly vary from that during the regular trading sessions.
  3. Price Volatility: The prices fluctuate magnificently compared to the regular trading time due to the extreme buying or selling after an influential news or announcement.
  4. Inability to View or Act on Quotes: The traders cannot view the price quotes through the electronic communication networks; instead, they must trust the brokers.
  5. Larger Quote Spreads: The order fulfillment becomes difficult when the bid asks spread is wider due to limited trading.
  6. Computer Delays: The trading system may not work efficiently during the pre and post-trading hours.
  7. Limit Orders Bias: During the post-market session, the ECNs often consider only the limit orders, not the market order.
  8. Competition with Professional Traders: These sessions are always mastered by large institutional traders who secure more information than retail traders.

Frequently Asked Questions (FAQs)

1. What is 24-Hours Trading Session?

A 24-hour trading session is common in highly liquid markets like the forex, where the currency exchange occurs throughout the day and night, I.e., 24 hours during all working days of the week (Monday to Friday).

2. What time is the New York trading session?

The trading session of the two major New York stock exchanges, I.e., the New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotations (NASDAQ), is 9.30 am to 4.00 pm.

3. What is a mock trading session?

A mock session is a trial or rehearsal usually lined up on any Saturday of the month by the stock exchanges to ensure the proper functioning of their trading system. Thus, the live ticks are seen even when the market is closed. It enables the brokers to examine their trading infrastructure, conduct contingency drills, access the new system or products, etc. However, as the session closes, the stock prices are updated as per Friday’s closing.

This article has been a guide to what is Trading Session. Here, we explain the pre and post-trading sessions, its examples, and four trading sessions. You may also find some useful articles here –

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