The New York forex session is normally the second-most liquid session. It overlaps with London, and this is considered to be the most liquid period of the day.
This session is open from 8am-5pm (ET), and the ‘overlap’ with the London session occurs between 8am and 12pm (ET). During this overlap, the US session could trade very much like the London market. Further, the beginning of the New York session is normally more volatile than later in the day.
In this lesson, we’ll look at some of the ways you can try and take advantage of the volatility levels in the New York FX trading session.
New York breakout strategy: trading the ‘overlap’
As with the London session, you can use a breakout strategy during the overlap, which seeks to take advantage of the expected increased volatility.
In the example chart below, EUR/USD formed a triangle-pattern at which the price of the market broke out during the overlap. Once you’ve properly taken risk-management measures, you can stage the entry into the market with any relevant mechanism of support and/or resistance.
Trading the later part of the New York session
As London closes for the day, volatility tends to decrease. We can see a markedly different tone in the average hourly move for the later portion of the US forex trading session.
The later part of the New York session can display less volatility. Since the average hourly moves are smaller in the later stages, you could use a range trading strategy.
This can help you take advantage of support and resistance levels, as with the example below. When the price moves to the upper boundary (red line), you could look to shorting the currency pair in anticipating the price to move down after reaching the specified price level. And when it moves to the lower boundary (the green line), you could buy the currency pair as the market’s pattern suggests it’ll appreciate after reaching that level.
The logic behind using this strategy is that as the volatility lowers, the levels of support and resistance may be harder to break and will therefore more likely hold – thus, benefiting the range bound trading strategy.
Ideal FX pairs to trade during the New York session
As with the London session, you can look to trade major pairs, so EUR/USD, USD/JPY, GBP/USD, EUR/JPY, GBP/JPY and USD/CHF. These pairs are usually the most liquid during the US session, especially the EUR/USD during the overlap.
When using a limit order, your order will only be filled at the price you designated or better.
Lesson summary
- Each forex trading session has unique characteristics
- The London forex trading session follows the New York session, which is then followed by the Asia trading session
- The liquidity during each session can lead to reduced spreads and therefore, lower trading costs
- During the overlap, the combination of increased volatility and increased liquidity can be beneficial to traders
Lesson complete
