Here, in this section, we shall discuss the London session. Just when the Asian markets are preparing to close their market, the European markets gear up to open their trading business. The London session opens at 3:00 AM EST (7:00 AM GMT) and closes after eight hours of intensive trading.
There are several financial centres around Europe, but people seem to primarily keep the focus on London. Hence, this session is often referred to as the London session.
London is considered the Forex capital of the world. And, it would be of no surprise that, business people make thousands of transactions every minute in this session. Moreover, 30% of the worldwide transactions are processed during the London session.
The pip movement in currency pairs during this session is typically high. Below is the table which represents an approximate pip movement in different pairs.
Points to remember about the London session
The London session overlaps with two other major trading sessions – the Tokyo session during its close and the New York session during its open. Due to this, an enormous amount of money flows into the market during this time. Hence, this creates high liquidity and possibly lower spreads.
London being the key financial centre, the volatility during this session is recognised as the most volatile of all sessions.
During the Asian session, the market usually consolidates and moves in a range. But, when the London session opens, the market conventionally breaks out the range and begins to trend. And, this trend typically continues until the New York session opens.
Note that, during the middle of the session, the market’s volatility tends to slow down. A reason for this could perhaps be that the traders would go to eat lunch during this time. Or it could even be that, the traders are waiting for the New York session to begin and the overlap to happen.
If the market was trending when the London session began, it does not mean that you can prepare to participate in the trend. This is because; sometimes, the trend reverses at the end of the trading session. And, the reason for the reversal could be that the traders are locking in their profits.
Which pairs should you keep an eye on during the London session?
The best part about the London session is that you can choose any pair to trade as a massive volume of trading happens during this session.
However, it is recommended to trade only the major pairs like EUR/USD, GBP/USD, USD/CAD, USD/CHF, and USD/JPY, as these pairs have very tight spreads. Another reason to stick to these pairs is that the news reports about these currency pairs usually come during this session.
Hence, this completes the lesson on the London/European session.
Also, to know how well you’ve understood this lesson, you can try answering the questions in the quiz given below.