London, the forex capital of the world
London’s location is very convenient and strategic, that is why most trades happen there. This is also why traders like forex traders like to monitor this specific location even though there are other financial centers in other parts of Europe. The trading volume that comes and goes in London is massive, with over a thousand transactions every minute of every day. In fact, of all the forex trading transactions worldwide, more or less 43% take place in London.
London’s timezone is also a plus because mornings in London tend to overlap Asia’s late trading, and afternoons in London overlap afternoons in New York. It means that when they overlap, two trading sessions are live at the same time.
London trading session is also known as the European trading session
The London trading session is also called the European trading session because other European countries also make up the whole London trading session and not just London alone, even if it is the world’s forex trading capital. The European trading session is just about the open when the Asian trading session and participant are about to close already.
Did you know?
Volatility is one of the most prominent characteristics of the London trading session due to the massive volume of trading transactions during this time. As we have mentioned earlier, the London trading session crosses and overlaps two major trading sessions, and it is also an important financial center. These are some of the reasons why there are a lot of trading transactions during this time. Massive trading transactions may also mean huge liquidity, less pip spread, and fewer transaction costs.
The London session is like a base where trends usually begin. This trend will continue until the beginning of the New York trading session. Again, there is massive volatility during this time because of the number of transactions that comes in. Later on, volatility tends to tone down in the middle of the session as people usually eat at noon just before the New York session begins. Towards the latter part of the London session, trends may go in the opposite direction as Europeans decide to secure their profits during the session.
Which currency pair is the best to choose?
The currency pairs with the tightest spreads are usually EUR/ USD, USD/ JPY, USD/ CHF, and GBP/ USD, but a trader can trade almost any pair because of the European session’s liquidity, and there is a massive trading volume. Currency pairs involving the Japanese Yen like EUR/ JPY and GBP/ JPY are also volatile during the London trading session, but they may have a wider spread than those previously mentioned.
News and press release about the economy or politics significantly impact currency pairs and any or more trading sessions.