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To ensure round-the-clock activity of trading exchanges, the work of market makers is divided into 4 trading sessions, which are superimposed on each other. From Monday to Friday (most banks do not work on weekends), traders, brokers, banks, market makers interact with their transactions on asset quotes. The logic and intensity of price movements directly depend on the current time, however paradoxical it may sound.
The thing is that the main stock exchanges work in the American session: NYSE, NASDAQ, etc. So, traders around the world are building their day in such a way as to be able to trade on them. As a result, much more operations are taking place in the European and American sessions than in the Asian and Pacific ones. If we talk about the distribution of time between sessions, it conditionally looks as follows.
The names of the sessions on some resources are replaced with the cities where the main financial exchanges are located (Sydney, Tokyo, London, and New York).
Features of trade in the “night” session
As mentioned earlier, the main volatility, like the main income, falls on the London and New York trading sessions, so what is the point of night trading then? The thing is that quotes at night are much more predictable. Due to the small number of active traders, quotes in 95% of cases move in a clear sideways.
The likelihood that support and resistance levels will be broken at night is minimal, even for assets for which these sessions are “home” (Yen, Australian and New Zealand dollars, etc.)
By the way, these assets are, nevertheless, the least prone to “calm” night trading, since Japan, Australia, New Zealand and China have a business day at that time, which means that political news, fundamental publications on currencies and shares of local companies will be published at night by MSC. Therefore, you still have to follow the economic calendar.
Strategies and recommendations for night trading
For trading in the Asian and Pacific sessions, any trading algorithm designed to search for rebounds is well suited. If we talk about indicators, then classic oscillators, Bollinger bands, fractal channel, etc. are well suited. Filtering the signals of the initiators does not make much sense, since their accuracy is very high, due to the maximum predictability of the market.
Consider the mechanism of opening positions in night trading sessions, using the classic “rebound indicator” of the Bollinger channel as an example. The logic of its use is simple – when the price approaches one of the external lines of the channel, with a high degree of probability it will rebound from there in the opposite direction.
The signals of any indicator and strategy at night need to be perceived with a certain discount. Because the exact setup can not wait. In the context of the Bollinger Channel, you can open transactions even before the price crosses the borders. And for classical oscillators, for example, RSI, you need to reduce the overbought/oversold levels from 80/20, to 70/30, or even to 60/40.
Also, to increase the frequency of signals and profitability of trading, it is worth considering a reasonable decrease in the timeframe and increase in money management.