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The opening of the London trading session entails increased trading activities. During this session, you can expect the market to snap in a different direction due to increased volatility and liquidity.
That means that around 43% of daily trading activities happen during this period, with traders hoping to capitalize on the market movement.
The London trading session is the most crucial in the forex market. If you want your position to ride a profitable market movement, you should open a position during the London trading period.
Take note, the London market opens at 8 AM and ends at 5 PM at the London local time (7 AM to 5 PM UTC).
During this period, you can choose which currency pair you'd like to trade due to the increased volatility and high trading volume.
But to maximize the trading session, you can open a position using these pairs:
One major reason why the London trading session is remarkably active is because numerous major financial centers are open during this period.
Here are the major financial centers that contribute to the popularity of the London trading session:
The overlapping operation of different financial centers means the market is saturated with different entities that trade currencies, bringing in huge demand and supply.
The London trading session is well-loved among forex traders. It provides traders with different profitable opportunities to grow their investments.
If these sessions' quirks are used correctly with the proper strategy, you can expect to enjoy high returns from your positions.
The London trading session is wildly popular due to its high liquidity. With its session crosses with Tokyo and New York, traders capitalize on the market and drive up forex transactions.
And you know that high liquidity entails increased volatility. When the London market opens, you can expect your position to witness as much market movement as others.
With increased volatility, you will enjoy a tight spread and other trading transaction costs.
And once it overlaps with the opening of the New York session, you will experience the most possible movement that may happen in the market.
But remember, volatility is a double-edged sword. It provides your potential profitable returns, but it also presents great risk.
To shield your investment from the increased volatility of the market, make sure to strategize your entry and exit points, have a polished risk management plan, and set up automated stops.
You'll see most market trends to take action during the London session. As you already know in the last lesson, the market tends to stay at its support and resistance level during the Tokyo session.
When the market transitions from the Tokyo to London session, that static market movement will suddenly spike up or down. That would often result in breakout trends that you can capitalize on for high returns.
This trend will continue throughout the session and surely spike even more once the London session crosses with the start of the New York session.
Before the London session ends, you can expect market reversals as most traders try to lock in their profits.
This is mainly driven by the shift of the traders' market sentiments. To shield your position in times of market reversal, it's advisable to use sentiment indicators to gauge the possible market snap.
The most effective way to trade the forex clock is to open a position when the two sessions overlap. Essentially, this happens when session A's latter period crosses session B's starting period.
Naturally, the forex market is busiest during this time because both sessions' traders are doing forex transactions.
As you know, the market tends to be static during the Tokyo session. That's because the Western traders are waiting until the London session opens.
But as the market enters the Tokyo-London session, it will experience an increase in liquidity. And the increase in liquidity entails higher market volatility.
The currency pairs that will experience high market movement are the ones with the Japanese yen, the euro, and the British pound.
The last four hours of the London session are the best trading period in the forex market.
During this period, the forex market experiences the highest trade volume due to high liquidity and increased volatility. The reason for this is the overlap of the forex market's two most traded sessions, the London and New York sessions.
When these two sessions overlap, you can use almost all the major currencies in your trade and still benefit from the increased volatility and tight spread. But if you want an extremely competitive pair to trade with, you can choose any of the following major pairs:
The interbank activities between Europe and the United States, paired with the influx of traders during this period, increase the session's market movement.
Okay, so you've learned the crucial role of the London trading session in your trading success. For the next lesson, prepare yourself as you're about to explore how the New York trading session impacts the forex market.