Trading Forex During the London Session

Just as Asian market participants are preparing to wrap up their trading activities, their European counterparts are commencing their trading day.

While Europe boasts several financial centers, it's London that captures the primary attention of market participants.

Historically, London's strategic location has placed it at the heart of international trade, and this position continues to benefit the city today.

London's significance in forex trading is further enhanced by its time zone. London's morning hours overlap with late trading in Asia, and its afternoon hours coincide with the opening of the New York City market.

Unsurprisingly, London is widely regarded as the global forex capital, with thousands of transactions occurring every single minute. Approximately 43% of all forex transactions take place in London.

Some traders also refer to the London session as the "European" trading session because, in addition to London, other major financial centers across Europe remain active during this time. These centers include Geneva, Frankfurt, Zurich, Luxembourg, Paris, Hamburg, Edinburgh, and Amsterdam.

Below, you'll find a table displaying the pip ranges for major currency pairs during the London session.

Please bear in mind that these pip values have been derived from historical data averages. It's important to note that they are NOT FIXED VALUES and can vary based on factors such as liquidity and prevailing market conditions.

Additionally, the session range for EUR/CHF has been excluded because the Swiss franc was pegged to the euro at 1.2000 during the specified period.

Here are some noteworthy facts about the European trading session:

1. High Transaction Volume: The London session, due to its overlap with the other two major trading sessions and London's pivotal role in the financial world, witnesses a substantial portion of forex transactions. This results in high liquidity and potentially lower transaction costs, including narrower pip spreads.
   
   

2. Increased Volatility: The London trading session is typically characterized by higher volatility. The sheer volume of transactions contributes to these market fluctuations.
   
   

3. Trend Initiator: Many trends in the forex market tend to originate during the London session, and they often persist until the commencement of the New York session.
   
   

4. Mid-session Lull: Volatility levels tend to decrease during the middle of the London session. This period often corresponds with traders taking a lunch break before awaiting the start of the New York trading session.
   
   

5. Possible Reversals: It's important to be aware that trends can sometimes reverse toward the end of the London session. European traders may opt to lock in their profits during this time.

These insights provide valuable context for trading within the European session.

Selecting Currency Pairs for Trading:

The European session boasts such substantial transaction volume that it offers ample liquidity for trading nearly any currency pair.

However, it's often advisable to focus on the major currency pairs (such as EUR/USD, GBP/USD, USD/JPY, and USD/CHF) during this session, as they typically feature the narrowest spreads.

Moreover, these major pairs are the ones most directly affected by news reports released during the European session.

For those seeking a bit more volatility, consider exploring the yen crosses, particularly EUR/JPY and GBP/JPY. Keep in mind that, as cross pairs, they may have slightly wider spreads in comparison.

Our next destination is the New York session, often likened to a bustling jungle where trading dreams come to life. And yes, it does bring to mind Alicia Keys' song, doesn't it?