No, you are not misunderstanding. In fact, you probably read that lesson more carefully than most beginners, and you picked up a discrepancy that most people probably missed altogether. Good catch!
For the rest of the forum, who might not know what we’re talking about, here is one example.
The School of Pipsology shows the following table of pip ranges for 3 trading sessions –
Then, the next lesson shows the following pip ranges for the Tokyo session –
Obviously, the two tables don’t agree, and they can’t both be correct.
Most likely, both are incorrect. (See the answer to your second question, below.)
Those average pip ranges change constantly, depending on (1) changes in the world’s geopolitical and economic conditions, (2) time of year, and (3) the time period over which the data are averaged. So, even if one of those tables was correct at the time the School lesson was written, it is certainly out-of-date now.
The first list of pip ranges I remember seeing was included in a book written by Kathy Lien. I thought those pip ranges were not only interesting, but most likely important to factor into my trading. So, I started looking for pip movements in line with Kathy Lien’s figures in the sessions I was trading. But, the real world wasn’t following the book. I was amazed at how quickly all the average pip ranges had changed, making Kathy Lien’s table obsolete.
A better guide to average pip ranges is the indicator called ATR (average true range). But, be careful how you use it. Success depends on applying it to the right time-frame, and on choosing the right number of periods to factor into the average.
It’s the perennial question – “how many trading sessions are there?”
In the interest of completeness, I once advocated dividing the forex trading day into 7 sessions: Wellington (New Zealand), Sydney, Tokyo, Singapore, Zurich (or Frankfurt, if you prefer), London, and New York. That division proved to be totally useless.
Combining Wellington with Sydney, and Singapore with Tokyo, cut the list to 5 sessions: Sydney, Tokyo, Zurich, London, and New York. But, that was still too finely divided.
The fact is, all the markets in the APAC (Asia-Pacific) region tend to move in concert with one another to a very large extent, with Tokyo leading the band.
So, a case can be made for treating all of the APAC region as one “trading session” – and, following a long tradition, that session is simply referred to as the “Tokyo session”.
(In similar fashion, all of central Europe in the CET time zone tends to move in concert with the London market, which is why most traders refer to all of Europe, from the Atlantic coast to the Russian border, as the “London session”.)
Some background on the Tokyo market –
For many years, the Tokyo forex market was the big dog in the APAC region, and every major bank in the interbank network maintained (and still maintains) sales and trading desks in Tokyo, as well as London and New York.
Late in the afternoon on every trading day, the New York offices of the major banks would electronically transfer their books (the open positions and open orders they were holding) to their Tokyo offices, and all of the world’s forex trading for the next 8 or 9 hours would transact through those Tokyo offices. (Then, late in the evening Tokyo time, early morning London time, the books would be transferred from Tokyo to the London offices of the major banks.)
Tokyo is no longer the largest APAC forex market by trading volume – Singapore has taken over the number-one spot. But, Japan is the largest economy (after China) in the APAC region, and size matters.
Tokyo’s central location in the APAC region matters, as well. Tokyo is one hour (or two, depending on time of year) behind Sydney, and one hour ahead of Singapore, Hong Kong, and Shanghai. So, during most of the trading day in Tokyo, all of the APAC markets (including the last of the afternoon session in Wellington, plus the smaller markets in Seoul, Taipei, and Manila) are trading simultaneously.
The tradition of dividing the forex trading day into 3 sessions – London, New York, and Tokyo – will probably continue, and it makes a lot of sense for it to do so.
