The "Window of Tolerance" as a psychological concept for Traders
The Window of Tolerance is a psychological concept that describes the optimal zone of arousal where a person is able to function and learn most effectively. It's where stress levels are manageable, and a person is able to remain calm and engaged. When stress levels become too high or too low, a person can move out of this window and into states of hyperarousal (too much stress) or hypoarousal (too little stress).
Relating this concept to the Forex market, we can think of the Asian session as the market's "Window of Tolerance." It is typically the least volatile and more predictable, which can be likened to a state where traders are calm and can make reasoned decisions without the pressure of extreme volatility.
On the other hand, the London and New York sessions are known for their higher volatility due to the significant overlap in business hours which leads to increased trading activity. These sessions can push traders out of their 'Window of Tolerance' into a state of 'hyperarousal' where the heightened activity can lead to stress and emotional trading decisions. Like the psychological response, traders can become overstimulated by the market's rapid movements, leading to fight (aggressive trading) or flight (avoiding trading or exiting positions prematurely) responses.
Relating this concept to the Forex market, we can think of the Asian session as the market's "Window of Tolerance." It is typically the least volatile and more predictable, which can be likened to a state where traders are calm and can make reasoned decisions without the pressure of extreme volatility.
On the other hand, the London and New York sessions are known for their higher volatility due to the significant overlap in business hours which leads to increased trading activity. These sessions can push traders out of their 'Window of Tolerance' into a state of 'hyperarousal' where the heightened activity can lead to stress and emotional trading decisions. Like the psychological response, traders can become overstimulated by the market's rapid movements, leading to fight (aggressive trading) or flight (avoiding trading or exiting positions prematurely) responses.