As the Asian foreign exchange trading market is closing up, the European market commences. Participants in this market generally view London as the major centre for this session, although there are several large financial centres in Europe. This session is extremely busy with approximately 30% of all transactions happening during this session.
London Session in Foreign Exchange Trading
- London has always been an important financial centre which makes this session very volatile.
- The London session overlaps with two of the major trading sessions which allows for a massive portion of all foreign exchange trading transactions to take place during this session.
- Most of the trends in the forex market commence in this session and will normally continue into the start of the New York session.
- During mid-session, the volatility in the market tends to die down as traders start preparing for the New York session.
- The trends during this session could reverse towards the end of the session because European traders often make a decision to lock in their profits.
Pairs to Trade
The volume of transactions and liquidity during this session makes it possible to trade almost any pair. Your best option may be to stay with the major currencies as they will offer the tightest spreads. The major pairs are normally the ones most influenced by news releases during this session.
The Japanese yen pairs are often quite volatile during this period, particularly pairs with the British pound and the Euro. As these will be regarded as cross pairs, the spreads may be wider.
New York Session
As the traders in the European session are returning from lunch, the US session commences. Similar to Asia and Europe, there is one major centre traders are watchful of during this session and that is New York.
- Due to the overlap with the European session, you can expect high volatility during the early session.
- Many of the economic reports are released close to the commencement of this session. Since about 85% of all forex trades include the dollar, economic data related to the US has the power to move the market quite considerably.
- The volatility and liquidity of the market tends to slow down as soon as the European session comes to an end.
Pairs to Trade
You should be aware that liquidity will be extremely high when both the European and the US sessions are open simultaneously. This is a busy time for large financial institutions, banks and multinational corporations. This session makes it possible for traders to trade any currency pair, although it is advisable that you stick to the major and minor pairs. Try to avoid those strange currency pairs.
Since the US dollar is more often than not included in the majority of forex transactions, all eyes will be on the data releases. If these reports are not what were expected in the market, it could cause volatility in the marketplace, with the dollar price moving up and down quite rapidly.
This is a very good session to trade in, particularly during the overlap period with the European session.
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