Just when Asian market participants are starting to close shop, their European counterparts are just beginning their day.
While there are several financial centers all around Europe, it is London that market participants keep their eyes on.
What’s the difference between a London newbie trader and a double-decker bus?
A double-decker bus sticks to its stops (loss orders)! 😂
Understanding the London session is crucial for forex traders due to its high liquidity and significant price movements that often occur during this time.
It’s considered a key session for setting daily trends and often provides numerous trading opportunities across various currency pairs.
Historically, London has always been at a center of trade, thanks to its strategic location.
Today, London benefits from its time zone.
(And according to Taylor Swift, let’s not forget about the hawt London boys.)
Its business hours open at 08:00 and closes 17:00 GMT (Greenwich Mean Time) aligning with the business hours in London.
London’s morning overlaps with late trading in Asia and London’s afternoon overlap with New York City.
In local time, it’s roughly 8:00 AM to 5:00 PM London time
It’s no wonder that it is considered the forex capital of the world with thousands of folks making transactions every single minute.About 43% of all forex transactions happen in London.
Some traders also refer to the London session as the “European” trading session.
That’s because aside from London, there are major financial centers open in Europe as well, such as Geneva, Frankfurt, Zurich, Luxembourg, Paris, Hamburg, Edinburgh, and Amsterdam.
We built a Forex Market Hours tool that will automatically convert all four trading sessions in your local time zone. Use it as a reference until you remember the market hours from memory. 🧠
Below is a table of the London session’s pip volatility per hour of the major currency pairs.
| Pair | London | ||
|---|---|---|---|
| EUR/USD | 10 | ||
| GBP/USD | 13 | ||
| USD/JPY | 19 | ||
| AUD/USD | 10 | ||
| NZD/USD | 9 | ||
| USD/CAD | 10 | ||
| USD/CHF | 10 | ||
| EUR/JPY | 22 | ||
| GBP/JPY | 22 | ||
| AUD/JPY | 16 | ||
| EUR/GBP | 6 | ||
| EUR/CHF | 8 |
These pip values were calculated using averages of past data. Take note that these are NOT ABSOLUTE VALUES and can vary depending on liquidity and other market conditions.
An easy way to find out the current average pip range for a currency pair during the Tokyo session is to use our MarketMilk™ app.
For example, here is the average pip range for GBP/USD.
Here are some neat facts about the European session:
- Because the London session crosses with the two other major trading sessions–and with London being such a key financial center–a large chunk of forex transactions take place during this time. This leads to high liquidity and potentially lower transaction costs, i.e., lower pip spreads.
- Due to the large number of transactions that take place, the London trading session is normally the most volatile session.
- Most trends begin during the London session, and they typically will continue until the beginning of the New York session.
- Volatility tends to die down in the middle of the session, as traders often go off to eat lunch before waiting for the New York trading period to begin.
- Trends can sometimes reverse at the end of the London session, as European traders may decide to lock in profits.
Which currency pairs should you trade during the London session?
Because of the volume of transactions that take place, there is so much liquidity during the European session that almost any pair can be traded.
Of course, it may be best to stick with the majors (EUR/USD, GBP/USD, USD/JPY, and USD/CHF), as these normally have the tightest spreads.
Also, it is these pairs that are normally directly influenced by any news reports that come out during the European session.
You can also try the yen crosses (more specifically, EUR/JPY and GBP/JPY), as these tend to be pretty volatile at this time.Because these are cross pairs, the spreads might be a little wider though.
Next up, we have the New York session, a jungle where dreams are made of. Hey, isn’t that an Alicia Keys song?
Is the London session right for you?
If you’re comfortable with high volatility and prefer trading during the European and US business hours, the London session might be a good fit.
The abundance of news releases and economic events provides ample opportunities for traders who are skilled at analyzing news and reacting quickly to price movements.
However, if you prefer calmer markets or trading during off-peak hours, you might find the London session too hectic.