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Everything you need to know about the three major FX trading sessions in Singapore

In today’s globalised economy, foreign exchange (forex) trading is crucial in facilitating international trade and investment. As one of the top financial hubs in Asia, Singapore is no stranger to this fast-paced and dynamic market. However, forex trading is not a 24-hour affair. Instead, it operates in three major trading sessions, each with unique characteristics and opportunities.

For traders in Singapore, understanding these sessions is vital to making informed decisions and maximising potential profits. This article will delve into the intricacies of forex trading sessions in Singapore and highlight key points that traders need to know.

Market timings and overlaps

Forex trading sessions are when financial markets in specific regions are open for business. In Singapore, the three significant sessions are the Asian session, the European session, and the US session. These sessions occur at different times due to the time zone differences between these regions.

The Asian session starts at 9 a.m. Singapore time and overlaps with the European session for four hours. During this time, major Asian financial centres, such as Tokyo, Hong Kong, and Singapore, are active. The Asian session offers low volatility and liquidity since most traders in this region are still asleep or have not entered the market yet. However, it can be a good opportunity for traders who prefer range-bound trading.

The European session is the most active and volatile of the three. It begins at 4 p.m. Singapore time and overlaps with the US session for four hours. This session sees major European financial centres, such as London, Frankfurt, and Zurich, open for business. As a result, it experiences high trading volume and volatility, making it an ideal time for traders who prefer short-term trades and rely on market fluctuations.

The US session starts at 8 p.m. Singapore time and overlaps with the Asian session for two hours. New York dominates it, the financial capital of the world, which sees high trading volume during this period. However, towards the end of the session, as traders in Europe start entering the market, volatility tends to decrease. The US session offers a variety of trading opportunities, especially for traders who prefer fundamental analysis.

Currency pairs and their characteristics

The choice of currency pairs is crucial for forex traders as it can significantly affect the outcome of their trades. In Singapore, the three significant sessions offer different currency pairs with varying characteristics.

During the Asian session, traders often focus on the Japanese yen (JPY) and the Australian dollar (AUD). The JPY is a safe-haven currency that tends to strengthen during market uncertainty. Hence, it can be suitable for traders who prefer risk-averse trades. On the other hand, the AUD is considered a commodity currency that tracks gold prices and is affected by economic events in China, Australia’s largest trading partner.

The European session saw high trading activity for major currency pairs such as the euro (EUR), the British pound (GBP), and the Swiss franc (CHF). The EUR offers high liquidity due to its status as a reserve currency, while the GBP can experience significant movements due to political developments in the UK. The CHF is known as a safe-haven currency and can be ideal for traders during times of market volatility.

During the US session, traders often focus on major currency pairs involving the US dollar (USD). These include the EUR/USD, GBP/USD, and USD/JPY. The movements in these pairs tend to be influenced by economic data releases from the US, making it essential for traders to keep track of them.

The importance of leverage in forex trading

Forex trading with leverage allows traders to control more significant positions with a smaller amount of capital. It can be beneficial for traders in Singapore, as it may provide them with the opportunity to make more substantial profits. However, leverage also comes with risks, and traders must understand its implications.

High leverage ratios can amplify losses if the market moves against a trader’s position. Therefore, traders should exercise caution when using leverage and consider risk management strategies. They should also monitor their margin levels and adjust leverage accordingly.

The trading session can influence the use of leverage. For example, traders may use lower leverage during low-volatility sessions to minimise risks. Similarly, they may opt for higher leverage during high-volatility sessions when market movements are more significant.

Economic events and their impact

Economic events can significantly affect the forex market, and traders in Singapore need to be aware of them. During the Asian session, economic data releases from Japan, China, and Australia can affect currency pairs involving these currencies. For example, the Bank of Japan’s monetary policy decisions can cause significant movements in the JPY.

In the European session, traders must consider economic events from major European countries, such as Germany and France. Data releases related to inflation, GDP, and employment can significantly affect currency pairs involving the EUR or GBP. Developments related to Brexit can also influence market sentiment.

Similarly, during the US session, traders need to keep an eye on economic data from the US, such as non-farm payrolls and retail sales. These releases can affect currency pairs involving the USD and lead to significant price fluctuations.

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