Latest revision as of 19:17, 20 November 2023

The previous session almost always will have an impact on the current trading session. For this reason, it is useful to know how the previous session will impact the current session and how you can go about trading it. This is what this Wiki will focus on.

This Wiki is part of our Fundamental and Sentiment Trading Strategies Wiki. Be sure to check that out HERE.

How to Trade the Previous Session

There are 3 main sessions that we have already learned about in a previous Wiki where you can find all the details HERE. They are:

This cycle repeats for the entire 5-day trading week making it a 24 hour market.

What you are looking for is what has happened in the previous session that has moved the markets. Sometimes nothing happens but oftentimes a country has released an economic figure that affected the currency that it belongs to in the previous session.

What often happens is that traders from the new session will trade the continuation of the move from the previous session.

One strategy is to enter in the direction of the move from the previous session slightly before the next session is in full swing. In this way the trader can catch any potential move before or as it starts to continue.

This strategy is simple and mainly a sentiment based strategy where traders look for anything that has moved the price of a particular currency in the previous trading session to continue moving it into the current and possibly following sessions.

The trade begins with a thorough assessment of what has happened in the previous session, which news has been released, how it impacted the market, and which currencies were affected. Tradersthen determine whether or not to anticipate this move to continue in the new session based on what has already taken place.

For example, if some key Australian data was released during the Asian session but the AUD currency was unaffected then it’s very unlikely that traders will look to get in on a trade with the Australian dollar in the following session. On the other hand, if the event came out and showed a large deviation and the price of the AUD moved heavily, then we can expect traders in the next session to get in on the move too.

This strategy relies on having a real-time news feed that updates the market sentiment instantly. With both entry methods, it is important to keep your eye on the news feeds for any events that could change the sentiment and send price moving in the opposite direction.

There are 2 ways to trade this type of event:

Trade the Breakout: This can be done with a Market Profile Trade because it may be that price is close to the highs or lows. This allows you to enter the move should it simply continue into the next session with little or no pullback. The Market Profile Trade can be found in the Technical Trading Strategies Wiki.
Trade the Pullback: Often times the market will take a break between sessions and the price will pull back against the move as profit taking happens. This can provide some great trading opportunities from levels of support and resistance, but patience is required to wait for the correct pullbacks.

Related Wikis

Readers of How to Trade the Previous Session also viewed:

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+The previous session almost always will have an impact on the current trading session. For this reason, it is useful to know how the previous session will impact the current session and how you can go about trading it. This is what this Wiki will focus on.
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+='''How to Trade the Previous Session'''=
+There are 3 main [[Forex_Trading_Sessions | sessions]] that we have already learned about in a previous Wiki where you can find all the details [[Forex_Trading_Sessions | HERE]]. They are:
+* [[Forex_Trading_Sessions#Asia_Pacific_Session | The Asian Session]]
+* [[Forex_Trading_Sessions#The_London_Session | The London Session]]
+* [[Forex_Trading_Sessions#The_New_York_Session | The New York session]]
+This [[The_Basic_Cycle | cycle]] repeats for the entire 5-day trading week making it a [[Forex_Market_Hours | 24 hour]] market.
+What you are looking for is what has happened in the [[Forex_Trading_Sessions | previous session]] that has moved the markets.  Sometimes nothing happens but oftentimes a country has released an [[Economic_data_releases | economic figure]] that affected the [[currency]] that it belongs to in the [[Forex_Trading_Sessions | previous session]].
+What often happens is that [[Institutional_and_Retail_Traders | traders]] from the [[Forex_Trading_Sessions | new session]] will trade the continuation of the move from the [[Forex_Trading_Sessions | previous session]].
+One strategy is to enter in the direction of the move from the [[Forex_Trading_Sessions | previous session]] slightly before the [[Forex_Trading_Sessions | next session]] is in full swing.  In this way the trader can catch any potential move before or as it starts to continue.
+This strategy is simple and mainly a [[Sentiment_Analysis | sentiment]] based strategy where [[Institutional_and_Retail_Traders | traders]] look for anything that has moved the [[Price_Action_Analysis | price]] of a particular [[currency]] in the previous [[Forex_Trading_Sessions | trading session]] to continue moving it into the current and possibly [[Forex_Trading_Sessions | following sessions]].
+The trade begins with a thorough assessment of what has happened in the [[Forex_Trading_Sessions | previous session]], which [[Economic_data_releases | news]] has been released, how it impacted the market, and which currencies were affected.  [[Institutional_and_Retail_Traders | Traders]]then determine whether or not to anticipate this move to continue in the [[Forex_Trading_Sessions | new session]] based on what has already taken place.
+For example, if some key Australian [[Economic_data_releases | data]] was released during the [[Forex_Trading_Sessions#Asia_Pacific_Session | Asian session]] but the AUD [[currency]] was unaffected then it’s very unlikely that [[Institutional_and_Retail_Traders | traders]] will look to get in on a trade with the Australian dollar in the [[Forex_Trading_Sessions | following session]].  On the other hand, if the event came out and showed a large deviation and the [[Price_Action_Analysis | price]] of the AUD moved heavily, then we can expect [[Institutional_and_Retail_Traders | traders]] in the next [[Forex_Trading_Sessions | session]] to get in on the move too.
+This strategy relies on having a real-time [[Trading_Tools#News_Feeds | news feed]] that updates the market [[Sentiment_Analysis | sentiment]] instantly.  With both entry methods, it is important to keep your eye on the [[Trading_Tools#News_Feeds | news feeds]] for any events that could change the [[Sentiment_Analysis | sentiment]] and send [[Price_Action_Analysis | price]] moving in the opposite direction.
+'''There are 2 ways to trade this type of event:'''
+# '''Trade the [[Breakouts_and_Breakdowns | Breakout]]:'''  This can be done with a Market Profile Trade because it may be that [[Price_Action_Analysis | price]] is close to the highs or lows.  This allows you to enter the move should it simply continue into the [[Forex_Trading_Sessions | next session]] with little or no [[Retracements | pullback]]. The Market Profile Trade can be found in the [[Technical Trading Strategies]] Wiki.
+# '''Trade the [[Retracements | Pullback]]:'''  Often times the market will take a break between [[Forex_Trading_Sessions | sessions]] and the [[Price_Action_Analysis | price]] will [[Retracements | pull back]] against the move as [[Sentiment_Analysis#Profit_Taking | profit taking]] happens.  This can provide some great [[trading]] opportunities from levels of [[Support_and_Resistance | support and resistance]], but patience is required to wait for the correct [[Retracements | pullbacks]].
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 Readers of '''How to Trade the Previous Session''' also viewed:
-* [[]]
+* [[Fundamental and Sentiment Trading Strategies]]
-* [[]]
+* [[How to Trade with Central Banks]]
-* [[]]
+* [[Trading Surprise Data and News]]
-* [[]]
+* [[Carry Trading]]
-* [[]]
+* [[Sentiment Analysis]]