Characteristics of the 3 Major Sessions: Asia, Europe & USA

Asian Session

During the Asian market only 8 % of total daily transactions go through Tokyo desks. This is the least active of the 3 major sessions. Most of this 8% only involves yen based indices trading with very little trades happening for other trading instruments. This is the reason why it is not suitable for one to trade during this time period. Not trading this period will save you a lot of time & money.

European Session

The London/European market takes the lion's share of the total transactions, 34% of all transactions are carried out during this session. London time zone is also well placed in terms of business trading hours for both eastern and western economies, this is when there are market overlaps and this results in high number of transactions during the this period. This time is most liquid and most volatile session for all the indices trading instruments.

The Europe time zone also includes the EUR zone member countries. The EUR zone has 17 members & major banks of these countries are open & there is a lot of liquidity as many transactions are being executed.

US Session

The US market takes up 20% of all transactions. The most active time for trading is approximately from 8 am to 12 pm when both London & New York dealing desks are open. This is the time when there is the highest market volatility as it is also the time when majority of the major USA economic reports announcements are announced.

European US Session Overlap

There are periods which have a greater volume of trade transactions, thereby increasing opportunities to make a profit.

For day traders the most productive hours are the London and the US session overlaps and this is the peak for stock trades is when these two overlap when there is a large volume of transactions and the stock trading market is most active.

During this overlap a significant amount of economic news reports is released generating a lot of price volatility & the stock trading prices move fast and there's a lot of opportunities to trade, this overlap offers the best market opportunity for those traders wanting to maximize profit.

The best hours for trading, are during this over-lap because the stock trading prices really move and the moves are decisive and offer the best chance to make profits

This is also why Asian traders, Japan will wait until afternoon to begin executing their stock orders, this is the period that will coincide with the Europe & USA market sessions.

Asian investors will not open indices trading transactions during the Asian time, therefore as a trader from anywhere else in the globe it is best to stay away at this time, after all even the hedge funds & other pro investors from Asia will avoid this time and wait for until afternoon when it is a lot easier because of the liquidity during the US and UK overlaps.

Therefore to come up with the best hours using based on these 3 marketmarket sessions as displayed below:

Market Hours and Overlaps

The chart above shows the timetable of when each market session starts & when it ends. The chart also shows when there are overlaps & also shows the best hours based on these overlaps.

Summary:

Determine Your Schedule

The type of trader you are determines your schedule. If you do not have a lot of time then a longer term strategy would suit you best. If on the other hand you've a lot of time then you might decide to set a day trading schedule where you open indices trading transactions during the most active market hours. The above chart shows the best GMT times to be in the stock trading market - from around 800 GMT and 1800 GMT.

Determine your time frame

To set up a schedule you need to determine your chart timeframe. Try using different chart timeframes until you find the most suitable and comfortable to use in accordance with your schedule.

Test your indices trading strategy

Test your indices trading strategy on a practice demo stock trading account for a period of time. Keep track of every transaction and monitor the progress of your schedule. Try to analyze what times are the most profitable for your indices trading strategy.

Your trading strategy should be specified on the trade plan that you use.

To learn and know more about how to specify this in your plan, read the tutorial about Indices plan. This learn trading guide will show you an example of a format that you can use to specify your schedule.