Volatile. That’s a pretty descriptive word and in the world of Forex trading it paints quite a picture. Well, not only is the European/London market described by that word (well, actually, it is called The Most Volatile) it also has the distinction of being the most traded session of all of them. Sure, we can’t forget the other European big players (Frankfurt, Paris) but when London opens at 3:00 AM EDT get ready to see some serious action.
What’s the big deal about the London trading session? Here are some facts to chew on. Because London (the city) is home to numerous trading firms and banks, the session is going to be heated. In fact, estimates of 30% of all Forex transactions come directly out of the London session. In other words, close to one-third of all Forex activity is in London. Or, if you need another way to see it, one in every three Forex transactions that will take place today will be from the London session.
The London session also sets the pace for much of the day trend movement. If you are a follower of day trends, you are in luck as London will be your starting line and the trends will typically last right into the New York session opening. Here’s the really fun part: the overlap time.
What’s the deal about overlaps?
Well, since the London session does not close until 12:00 PM EDT and the New York session opens at 8:00 AM EDT there is a four hour window of trading going on at both places. Remember when we told you that 30% of all Forex activity takes place during the London session? Well, hold on to your hats because the four hour overlap of London and New York is the most active time in all of the Forex trading market.
How active are we talking about?
About 70% of the total average range for all currency pairs during the London session and about 80% of the total average range during the New York session. If you are trying to find the best times during the day to sit glued in front of your computer screen monitoring the trading activity, your best time to do this is during the four hour overlap.
There’s even another overlap! It’s not a big one, only one hour in length but when London opens at 3:00 AM EDT, the Asian market is still open. Sure, it closes at 4:00 AM EDT but the overlap does have some significance – although far less than the London/New York one.
Speaking of volatility
The hot currency pairs during the London session are GBP/JPY, EUR/JPY and GBP/USD. Other hot pairings include USD/CHF, AUD/JPY, EUR/CHF and EUR/USD. You could say that pretty much any currency pair sees action in the London session.
If you are seeking a seat-of-your-pants, nail-biting dose of adrenalin rush when trading, you may have found your fix with the London/New York overlap. Don’t forget, there are other good trading sessions, but the activity during this four hour window cannot be matched any other time in Forex trading.