The forex market operates 24 hours a day, divided into three major trading sessions: the Asian, European, and North American sessions. Each session exhibits unique characteristics in terms of volatility and average pip movement due to differences in trading activity, economic data releases, and overlapping periods.

Overview of Forex Market Sessions

1. Asian Session
   • Hours: 11:00 PM to 8:00 AM GMT
   • Major markets: Tokyo, Hong Kong, Singapore, and Sydney
   • Currency pairs: JPY, AUD, NZD, and USD-related pairs
   • Characteristics: Lower volatility, tighter ranges, and less dramatic movements except for news-driven events.
   • Average pip movement:
     • Major pairs like USD/JPY and AUD/USD often see 30-50 pips of movement.
     • Cross pairs like AUD/JPY or GBP/JPY may move 50-70 pips during active times.
2. European Session
   • Hours: 7:00 AM to 4:00 PM GMT
   • Major markets: London, Frankfurt, and Zurich
   • Currency pairs: EUR, GBP, CHF, and major USD pairs
   • Characteristics: High volatility, major economic releases, and increased trading volume.
   • Average pip movement:
     • EUR/USD and GBP/USD typically move 70-120 pips on average.
     • Cross pairs like EUR/GBP and GBP/JPY often see 80-150 pips due to higher activity.
3. North American Session
   • Hours: 12:00 PM to 9:00 PM GMT
   • Major markets: New York and Toronto
   • Currency pairs: USD, CAD, and major cross pairs
   • Characteristics: Volatility peaks during the overlap with the European session and economic news releases.
   • Average pip movement:
     • Major pairs like USD/CAD and EUR/USD typically move 60-100 pips.
     • Cross pairs like GBP/JPY and USD/JPY often move 80-150 pips, especially during volatile events.

Factors Influencing Average Pip Movement

• Trading volume: Higher volumes during the European and North American sessions result in larger price swings.
• Economic data: News releases like GDP, employment reports, and central bank decisions can increase volatility.
• Overlapping sessions: When the European and North American sessions overlap, major pairs often experience the most significant movements.
• Currency pair liquidity: Major pairs (e.g., EUR/USD, USD/JPY) typically exhibit more consistent pip movements, while exotic pairs may see sporadic spikes.

Average Pip Movements by Currency Pair

• EUR/USD:
  • Asian session: 30-50 pips
  • European session: 70-120 pips
  • North American session: 60-100 pips
• GBP/USD:
  • Asian session: 30-50 pips
  • European session: 80-150 pips
  • North American session: 70-130 pips
• USD/JPY:
  • Asian session: 40-60 pips
  • European session: 50-100 pips
  • North American session: 60-120 pips
• AUD/USD:
  • Asian session: 40-70 pips
  • European session: 50-100 pips
  • North American session: 50-80 pips
• GBP/JPY:
  • Asian session: 50-70 pips
  • European session: 100-200 pips
  • North American session: 100-180 pips

Key Observations

• Asian session: Lower volatility and smaller pip movements due to reduced trading volume. Exceptions occur with news affecting JPY, AUD, or NZD.
• European session: The most volatile session with the highest average pip movements due to London’s dominance in forex trading and the release of key economic data.
• North American session: Volatility spikes during the European-North American overlap and major U.S. data releases.

Tips for Traders

• Trade the overlap: Focus on the European-North American overlap for the highest volatility and trading opportunities.
• Adapt to the session: Use range-trading strategies during the Asian session and breakout or trend-following strategies during the European and North American sessions.
• Monitor economic calendars: Plan trades around key data releases to take advantage of volatility.
• Choose the right currency pairs: Trade pairs most active in each session, such as JPY pairs in the Asian session or GBP pairs in the European session.

FAQs

What is pip movement in forex?
Pip movement refers to the change in a currency pair’s value, typically measured to the fourth decimal place (e.g., 0.0001).

Which session has the highest average pip movement?
The European session typically has the highest average pip movement due to its large trading volume and economic activity.

Why is the Asian session less volatile?
The Asian session has lower volatility because trading volumes are lower, and major markets in Europe and the U.S. are closed.

What are the most volatile currency pairs?
GBP/JPY, EUR/JPY, and GBP/USD are among the most volatile pairs, especially during the European and North American sessions.

When is the best time to trade forex?
The European session and the European-North American overlap are the best times for trading due to high volatility and liquidity.

Why do pip movements vary between sessions?
Pip movements vary based on trading activity, liquidity, and the timing of economic news releases during each session.

How does session overlap impact pip movement?
Session overlap, such as between the European and North American sessions, leads to higher trading volume and larger pip movements.

Are exotic pairs more volatile than major pairs?
Yes, exotic pairs often exhibit higher volatility but come with wider spreads and lower liquidity.

How do economic news releases affect pip movement?
Economic news releases can cause significant spikes in pip movements, especially for currency pairs tied to the affected region.

Can I trade all sessions effectively?
Yes, but the choice of strategy and currency pairs should align with the session’s volatility and characteristics.

Conclusion

Average pip movement varies across forex market sessions, reflecting differences in trading volume, regional activity, and economic events. The European session generally offers the highest volatility, while the Asian session is calmer, ideal for range trading. By understanding session-specific dynamics and planning trades accordingly, traders can optimise their strategies and capitalise on market movements.