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LONDON SESSION

A Guide to Trading the London Session for Forex Traders

The London trading session makes up the greatest portion of the overall average FX turnover*, or around 35%. Throughout the year, the New York and London sessions of FX cross over.

Talking points for this topic include:

  • When does the London foreign exchange market open?
  • The top three facts regarding the London trading session
  • How to trade breakouts during London’s trading session?

WHAT IS THE OPENING TIME OF THE LONDON FOREX MARKET?

The London foreign exchange market is open from 3 a.m. to 12 p.m. ET. The London forex market session has the highest volume of any currency market session.

The ET time.

OPEN3:00 AM
Close12:00 PM
Overlap with Asia session3:00 AM – 4:00 AM
Overlap with New York session8:00 AM – 12:00 PM

THE TOP 3 FACTS TO KNOW ABOUT THE LONDON TRADES

1.) The London session is quick and lively.

The slower Tokyo market will lead into the London session, and traders should often expect volatility to rise when prices start to shift from liquidity sources headquartered in the UK.

The “average hourly move” on several main currency pairings will often climb when prices arrive from London. Here is a time-based examination of the EUR/USD exchange rate. Take note of how much larger these changes tend to be on average after the end of the Asian session (Asia session closes at 3 a.m. ET-blue dot):

LONDON SESSION

Compared to the Asian session, support and resistance may be broken far more readily (when volatility is usually lower).

These ideas are crucial to the trader’s strategy when making bets during the London Session since traders might try to take advantage of this volatility by trading breakouts. When trading breakouts, traders search for erratic movements that might last for a while.

2.) Pay attention to the overlap

The “overlap” occurs when the London and US sessions coincide in real-time (8 a.m. ET to 12 p.m. ET). These are the two biggest market centers in the world, and during the overlap of these four hours, there will be a lot of liquidity entering the market, which will cause significant quick changes.

LONDON SESSION

The volatility peaks between 8:00 a.m. and 12:00 p.m. ET, when the London and New York FX sessions overlap, as seen in the figure above. A breakout technique that takes advantage of the higher volatility experienced during the overlap may be used by traders to trade the overlap.

3.) Extreme liquidity

One of the most liquid trading sessions is the London FX session. Major currency pairings may trade at very low spreads because of the enormous buying and selling volume. Finding trends and breakouts to trade may interest day traders attempting to target short movements to save money on spreads.

THE BEST CURRENCY PAIRS TO TRADE DURING THE LONDON SESSION ARE:

There are currency pairings that will see a spread reduction because of the large volume and offer traders lower spread costs, but there is no “best” currency pair to trade during London forex market hours.

The important currency pairings, including EUR/USD, USD/JPY, GBP/USD, and USD/CHF are among these currencies. During the London forex session, the biggest currency pairings see substantial trading volumes.

Due to the inter-bank activity between the United States and Europe/London, the overlap most impacts the EUR/USD, USD/JPY, and GBP/USD currency pairings. These are the trading pairs to keep an eye on if your trading strategy is better suited for volatility since they will be swamped with liquidity and move more on average during the overlap.

TRADING BREAKOUTS IN THE LONDON SESSION:

With the addition of the possibility of an influx of liquidity and volatility at the open, trading breakouts during the London session is essentially the same as trading breakouts at any other time of the day.

When looking to trade breakouts, traders often seek strong support or resistance to plan their bets against.

A rising wedge pattern, a trend line with a resistance level that is finally broken, and a breakout are all shown on the chart below:

LONDON SESSION

Risk management is a key advantage of this arrangement. Stops may be kept quite close to the trend line, allowing traders to maintain relatively tight stops. Losses are limited if the support/trend line is broken, and if the approach is successful, it can result in a favorable risk-to-reward ratio.

Potential breakouts are far more probable during the London session due to the rise in liquidity and volatility.

TIPS AND STRATEGIES FOR LONDON SESSION TRADING

Remember that volatility and liquidity increase while trading the London open, so trade carefully and with the proper leverage. Download our Forex for Beginners trading guide if you’re new to the market and want to learn the fundamentals.

The New York session, as well as the Asian session, and the London session all have distinctive features that forex traders should be aware of.

Key advice:

  • During the London session, liquidity and volatility rise.
  • There may be further breakouts throughout the London session.
  • Remember to keep an eye out for greater volatility and liquidity during the period between the London and New York sessions.

2016 Triennial Report of the Bank of International Settlements (BIS)*

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