Know What is a Trading Session and its Types: Trading has a wide range of meanings associated with it. For a specific sector, the ways and means of trades differ with more than a marginal difference. For example, the trading performed by a local business in an area is distinct from what happens in a stock market. But both are parts of similar phenomena.
However, they have a single thread which binds them together, that is a trading session. It is that time or a specific period of the day where the majority of trades take place for a locale or a locality. The hours of trading sessions may differ based on locations and the type of markets.
Trading Session Definition
In general, investors refer to it as the time between the opening and closing period of the market. It is related to an entire day. All markets like commodities, forex, bonds, futures, and stocks have abstract trading sessions due to the distinct features and characteristics they possess. Also, the primary trading hours will always differ from nation to nation as per their geographical structure and time zones.
Modus Operandi of a Trading Session
The sessions for trading hours may vary based on the country and classification of instruments and assets. The trading session in London begins at 7:00 GMT, while the Tokyo session is in its last hours between 7:00 GMT to 8:00 GMT. Precisely in Asia, traders exit their positions during that time, while investors in Europe arrive with their entries. Likewise, the US markets start at 9:30 AM and close trading at 4:00 PM during the working days. They comply by the timings of NYSE (New York Stock Exchange).
Going by the Eastern Time, the US bond markets’ trading sessions begin at 8 AM and ends at 5 PM. Similarly, the futures market has a different trading pattern and sessions. It entirely depends on the kind of stock, commodity or currency investors choose to trade. Also, the type of exchange matters a lot too.
Not knowing about the trading hours of sessions can cause inexplicable trouble for a trader wanting to trade derivatives.
Different Types of Trading Sessions
- After Hours Market Trading: As it appears, the market starts after the usual timings; from 4:00 PM to 8:00 PM. However, there is a slight possibility the time may vary a little depending upon an exchange.
- Pre-Market Hours Trading: It takes place between 4:00 AM to 9:30 AM on weekdays.
Both these trading sessions come with benefits of analysing and processing the inputs of the stalwart experts of the market. There are important news and announcements every now and then. Working closely on those pieces of information can come handy in profit bookings. However, they even pose some risks that should be notified. Here are a few:-
- Volatility in Prices: There may be instances of uncoordinated movement of stocks and commodities during these trading sessions. That can cause price volatility, resulting in significant fluctuations. Especially during important announcement or report, the market may run amuck.
- Less Technical Support: During pre and post-market trading sessions, there is seldom technical support available from any platform or a brokerage firm. That can cause time lags which can incur losses.
- Can’t act on Quotes: There are brokes which bar investors from viewing quotes from other trading systems or elsewhere but theirs. They do not allow electronic communication network (ECN).
- Ballooning Competition: As a trader steps in the unchartered territory of after-hours, he/she may have to take on professionals of the business, who have a backing of big institutions.
- Biases: There may be a situation during after-hours trading sessions where several ECNs won’t accept market orders but limited ones.
- Lacks Liquidity: There is an absence of liquidity in pre and post-market hours as not many traders get involved in trading during those hours.
- Huge Quote Spreads: There are wider biddings and ask spreads that make the execution of orders stringent. It is due to minimum bustling in trading.
- Differences in Prices: One may find a difference in stock prices compared to the regular trading sessions.
So, if a trader takes care of these nitty-gritty pre and post hour trading sessions can be fun.
Trading Sessions For 24 Hours.
The global forex market is one such place that operates for the entire duration of the day. Here, trading sessions for all 24 hours, which is it is the largest liquid market globally. In this, brokerage firms and big reputed bank exchange currency between themselves. Foreign currency exchange markets open for five days a week in different parts of the world.
A trading session is a time period dedicated to traders during which they have a chance to bid on their respective security, instrument or an asset. It has four types of phases: Normal trading sessions, pre-market hours, post-market hours and 24 hours sessions. As per the requirement and circumstances, investors can choose the time and perform their daily trades.