Opportunities and Challenges for Traders in the North American (New York) Forex Trading Session

Opportunities and Challenges for Traders in the North American (New York) Forex Trading Session

If you are looking for opportunities to increase your capital, then the Forex market is a good choice. The Forex market is the largest financial market in the world, with a daily turnover of trillions of dollars. The market is available 24 hours a day, but its structure changes during this day, because the world Forex market consists of 4 main sessions. Let's consider the features of the North American (New York) Forex trading session.

What is Forex Trading?

The Forex market is the market of foreign currencies. Currencies on the market are traded in pairs. That is when trading a currency pair, a trader exchanges one currency for another. For example, when trading the EUR/USD pair, you exchange euros for dollars or dollars for euros. The ratio of the value of the main currency to the quote currency is called the exchange rate of the pair. Usually, the main currency is written first in the pair, and the quote currency is the second. That is, the main currency in our example is the euro, and the quoted currency is the US dollar. The main goal of the trader is to make the most profit, and this is possible by buying the currency at a lower price and selling it at a higher price. That is, traders receive income from exchange rate fluctuations. Market fluctuations will depend on a combination of factors:

  • Interest rate. By increasing the interest rate, central banks increase the return on capital for investors. This increases the investment attractiveness of the country. Accordingly, there is a large inflow of foreign currency in the country. All this strengthens the national currency.
  • Political news. The economic policy of the state plays a significant role in the Forex market. Traders often follow economic news to predict possible decisions that will affect the Forex market. Such decisions can be changes in the regulation of certain sectors of the economy and changes in the tax system. Also, the international policy of the state affects the exchange rate. Because all spheres of the economy are globalized, states depend on each other, so if there is tension between countries, it can negatively affect the exchange rates of their national currencies.
  • Economic indicators. If the country's exports are significant and exceed its imports, then we can observe the basic law of economics. In this case, the law of supply and demand applies. The higher the demand for products, the higher the price for these products. Accordingly, a greater amount of money enters the country. Also, general economic indicators, such as the unemployment rate, inflation rate, GDP volumes, etc. affect the exchange rate.
  • Events and news on the capital market. News about deals, issuance, and sale of securities in a certain country can show the general economic situation.
  • The situation on the market of raw materials. The economies of some countries are based on the export of raw materials. Accordingly, an increase in the price of certain raw materials can bring a surplus profit to the country that exports these raw materials. And it is clear that this increases the inflow of currency to the country and strengthens the national currency.

What are the main Forex sessions?

There are four of the most massive Forex sessions. The first is the London Forex session. The London Forex session lasts from 8:00 am to 6:00 pm GMT.

Approximately 30% of all transactions in the Forex market fall precisely on the European Forex session. Very high volatility is observed during this session. The European session overlaps with the Asian session at the beginning of the session and with the American session at the end of the session.

So the most stable and least volatile time is the middle of the trading session. In general, the European session is characterized by high volatility and low spreads on major pairs. It is believed that after the opening of the London session, the formation of a trend begins, which continues until the opening of the American session. The best currencies to trade during this session are EUR/USD, GBP/USD, USD/CAD, USD/CHF, and USD/JPY.

The second is the New York Forex session. The New York Session lasts from 1:00 pm to 9:00 pm GMT. The American session is volatile, second only to the European session. The US dollar is the most popular currency in the Forex market in general, but it becomes even more traded during the New York session. Of all transactions, 85% are made with the US dollar. On Friday afternoon, volatility becomes minimal because the European and Asian markets stop their work for the weekend.

The third is the Tokyo Forex session. The Tokyo Forex session lasts from 11:00 pm and closes at 9:00 am GMT. The Asian trading session is considered less volatile than the European or American one. Currency pairs move in a rather narrow range. You should focus on trading pairs like AUD/USD and NZD/USD rather than GBP/USD and EUR/USD.

The Sydney session lasts from 9:00 pm to 7:00 am GMT. This session is the least volatile of all those listed. It is believed that this session is good for beginners and also during this session to use long-term trading strategies more effectively. The best pairs for trading would be those that include the Australian and New Zealand dollars and the Japanese yen.

What are the best currencies to trade during the New York session?

Since the American session overlaps with the European session, the most volatile and liquid will be the main currency pairs and crosses. You can also often find the use of such a pair, as USD/JPY, as a safe-haven asset. So the best pairs to trade during this session are:

  • EUR/USD;
  • GBP/USD;
  • USD/CHF;
  • USD/CAD;
  • GBP/JPY;
  • GBP/CHF.

Due to strong fluctuations in the exchange rate, the most logical strategy to use is breakout trading using a tool like RSI.

This strategy involves setting a price level to be broken, after which a buy or sell transaction should be executed. In such a strategy, it will be appropriate to use pending orders such as Buy Limit and Sell Limit, Buy Stop, and Sell Stop.

Conclusion

So we determined what features the American trading session has when the session is more volatile, which currency pairs should be preferred, and which strategy is suitable for these conditions.

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