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The New York Session: Foreign Exchange Trading Tips

One of the most active forex trading periods is the New York session. The most liquid time of the day is when the US session crosses over with the London session of the foreign exchange market.

WHEN DOES THE NEW YORK FOREX SESSION BEGIN?

The FX session in New York starts at 8:00 AM ET and ends at 5:00 PM ET. When the US and London FX market sessions cross over, there is a “overlap.” The overlap is between 8:00 AM ET and 12:00 PM ET since the London Forex market session begins at 3:00 AM ET and ends at 12:00 PM ET.

The US session may trade quite similarly to the London session during this overlap.

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Source: DailyFX

Typically, the New York session’s opening is more erratic than the afternoon’s trading. To trade varying degrees of volatility, traders might use a variety of strategies.

NEW YORK BREAKOUT STRATEGY: ‘OVERLAP’ TRADING

When the London and US FX sessions coincide, this is known as a “overlap.” These are the two biggest market centres in the world, and during the overlap of these four hours, there will be a lot of liquidity entering the market, which will cause big, quick changes.

The picture below demonstrates how average hourly changes in the EUR/USD reach peaks during the overlap (between the green lines) of the two largest markets.

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Source: Daily FX

A break-out technique that takes advantage of the higher volatility experienced during the overlap may be used by traders to trade the overlap.

Below is an illustration of the New York breakout technique utilising the EUR/USD:

The price of the EUR/USD broke out of a triangular pattern that it had developed during the overlap. The entrance into the trade may be staged with any pertinent support and/or resistance mechanism after a trader has adequately handled risk management.

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Source: Daily FX

TRADING IN THE SECOND HALF OF THE NEW YORK SESSION

Volatility is likely to sharply decline once London closes for the day. The average hourly move during the latter part of the US forex trading session can be seen on the same chart we previously examined, which displayed the average hourly changes by hour of the day in EUR/USD:

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Source: Daily FX

As you can see, there is less volatility in the latter portion of the New York session. A range trading technique could be used by traders as the average hourly changes are less in the latter hours of the New York session.

A trader who employs a range trading strategy makes use of support and resistance levels. An example of a range trading technique may be seen in the chart below. Traders will seek to short the currency pair when the price climbs over the upper limit (red line). Traders will aim to purchase the currency pair when the price falls below the lower limit (the green line).

A range trading strategy is justified by the idea that when volatility declines, support and resistance levels may become more difficult to breach and more likely to remain, favoring the range bound trading approach.

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Source: Daily FX

BEST FOREX PAIRS FOR THE NEW YORK SESSION

The big currency pairings including EUR/USD, USD/JPY, GBP/USD, EUR/JPY, GBP/JPY, and USD/CHF are the best to trade during the New York session. The EUR/USD during the overlap will be the most liquid of these pairings during the US session.

The London forex trading session comes after the New York session, which is subsequently followed by the Asia trading session. Each forex trading session has its own distinctive features.

Since spreads will be less as a result of the liquidity, trading expenses will be cheaper. The majority of forex traders will benefit from the combination of heightened volatility and more liquidity during the overlap.

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