IC Markets
New traders in Asia often assume the Tokyo session is a high-liquidity window because Tokyo is one of the world's big financial hubs. It is, for equities and bonds. But spot forex is a global, London-centred market, and the share of daily forex turnover that happens during Asian hours is much smaller than during the London and New York sessions. That thinness is not a problem in itself, but it changes how price behaves and what your trading costs are.
Where the volume actually is
| Session (GMT) | Approx share of daily FX turnover | Character |
|---|---|---|
| Sydney / early Tokyo | Low | Thin, gappy, wide spreads |
| Tokyo, 00:00-07:00 | Roughly a fifth of the day | Moderate, range-bound |
| London, 07:00-16:00 | The largest single block | Deep, directional |
| London-NY overlap, 12:00-16:00 | Peak liquidity | Tightest spreads, biggest moves |
| Late NY into Sydney | Lowest | Very thin, avoid |
These proportions are approximate and vary by pair, but the pattern is stable: the deepest liquidity is the London-New York overlap, and the Tokyo session is a fraction of that. For JPY pairs specifically, Tokyo hours are more active than for, say, EUR/GBP, but even USD/JPY sees its heaviest flow during London and New York.
How thin liquidity shows up
- Wider spreads. The spread on EUR/USD might be 0.3 pips during the overlap and 1.0 to 1.5 pips in quiet Asian hours. On minors and exotics the difference is larger.
- Choppier price. With fewer participants, a single decent-sized order can push price further than it would in a deep market, then it snaps back. This produces the false breakouts the Asian range is known for.
- Worse fills on stops and market orders. Slippage is larger when the book is thin, particularly around the Tokyo fix and any Asian data.
- Gaps. The thinnest hours (late New York into Sydney) can gap on a headline because there is barely anyone quoting.
The parts of the Tokyo session that are liquid enough
The first one to two hours after the Tokyo open (00:00 to 02:00 GMT) carry the most Asian-session flow, as Japanese institutions and the fixing bring participants in. The last hour before London (06:00 to 07:00 GMT) picks up as European desks come online. The middle of the session, roughly 03:00 to 05:00 GMT, is the quietest and choppiest part, and it is where a lot of the noise-driven stop-outs happen.
Ravi trades USD/JPY and AUD/JPY in the first two hours of the Tokyo session before his commute. He found that trading the same setups between 03:00 and 05:00 GMT gave him far worse results: more false breakouts, worse fills, wider spreads eating his edge. He now simply does not trade the quiet middle of the session, and his win rate in the active first two hours is noticeably better.
Trading the thin session well
- Stick to the liquid windows: the first two hours after the Tokyo open and the hour before London.
- Use range-edge stops, not tight stops, because the choppiness will clip anything close.
- Check the spread before entering. If it is double its overlap value, factor that into your target and stop.
- Avoid market orders in the quietest hours; use limits where possible to control the fill.
- Be flat or very small before the Tokyo fix (around 00:55 GMT) if you are not specifically trading it.
Thin liquidity is not a reason to avoid the Asian session. It is slower and more range-bound, which suits a patient strategy. It just means the tradeable hours are narrower and the costs are higher than the deep London-NY window.
Frequently asked
Is the Tokyo session bad for trading?
No, but it is different. It is slower, more range-bound, and thinner, which suits a patient range strategy. The mistake is trading it with tight stops and expecting London-style directional moves.
Which hours of the Tokyo session are best?
The first one to two hours after the 00:00 GMT open, when Japanese institutional flow and the fixing bring in participants, and the hour before the London open. The middle of the session (roughly 03:00-05:00 GMT) is the quietest and choppiest.
Why are spreads wider in Asian hours?
Fewer market participants are quoting, so the gap between the best bid and offer is larger. This is most pronounced on minors and exotics and in the thinnest hours around the session edges.
What is the Tokyo fix?
A daily benchmark rate set around 09:55 Tokyo time (00:55 GMT) for settlement purposes. It can cause a short burst of directional flow, mainly in USD/JPY, and it is worth being flat or small around it unless you are trading it deliberately.
Does thin liquidity cause false breakouts?
It contributes to them. In a thin market a single order can push price through a level, triggering breakout entries and stops, then price reverts because there was no real flow behind the move. The Asian range is known for this.