Nick Goold
London is the most active of the three financial centers for the forex market. As London is the middle session, Asian and US-based traders are also active during the London timezone. If traders can only trade one session, it should be London as there are the most trading opportunities.
What time is the London session?
There is no official time when the forex market opens and closes in London, but most large traders in London are active from 7:30 am until 4 pm. The Asian forex market is active until 8 am London, and US-based traders usually start trading from 1 pm London time.
Best forex pairs to trade during the London session
The best forex pairs during the London session are those with narrow spreads and high volatility. As a result, GBPUSD, GBPJPY, EURUSD, EURJPY, and USDJPY are usually the most popular with short- and longer-term traders.
Minor markets like USDCHF, EURGBP, and GBPAUD, for instance, are best only traded by swing traders as the spreads are wide and not easily traded by day traders. On the other hand, AUDUSD can present trading opportunities for swing traders, but day traders are better off trading the AUDUSD during the Asian session.
Trading strategies for the London session
Before 8 am
The 7:30 am to 8:00 am period is when London traders enter the market and react to moves in the Asian market. Usually, London traders will look to positions in the opposite direction of the movement in the Asian session, so look for opportunities to buy at support or sell at resistance.
The forex market is usually relatively quiet during this period but can move quickly occasionally, so do not be surprised by sudden price moves. However, when London traders follow the Asian price move, it usually means a strong trend will continue past 8 am London time.
8 am to 10 am
The forex market volatility increases significantly when the UK stock market opens at 8 am. As a result, London traders will be most aggressive during this period, and trading with the trend is usually the most profitable strategy. As a result, this session is the best time to trade for most traders during the London session.
10 am to 12:30 pm
This period is usually quiet, where a range trading strategy is best. On most occasions, look for the market to reverse the move from 8 am to 10 am unless a significant news announcement moved the market or prices have risen above resistance or fallen below support on a daily chart. Then, a profitable strategy can be to wait for the market to form a gap above or below the 10-bar moving average on a 5-minute chart and trade against the recent move.
12:30 pm to 1:30 pm
One of the most challenging times to trade as traders wait for US economic data to be released. Most traders avoid trading before economic announcements, so the market is usually quiet. Therefore, it is best to refrain from trading during this period.
Occasionally large traders will look for stops in this period, so there can be surprising moves that do not make sense. Should you see the market rising towards resistance or downwards to support, it is best not to trade against the market. Should stop loss orders of other traders be hit, scalping traders could have a short-term reversal trading opportunity.
1:30 pm to 2:30 pm
On most days, there will be an economic announcement at 1:30 pm. Judging the impact of economic reports can be tricky, so for most traders, it is best to wait 5 to 15 minutes after the announcement to trade. While analyzing the news is vital, analyzing the price action after the economic announcement is more important. Sometimes a weak economic figure can result in an initial fall in a forex pair only for the market to quickly reverse as traders can have different views.
2:30 pm to 4 pm
The opening of the US stock market at 2:30 pm sees the volatility increase again as forex traders look to follow the risk on or off trend from the stock market. Should the stock market rise, markets like the USDJPY and GBPUSD usually rise. Analyzing the relationship between the stock market and your chosen forex pair can help you find trading opportunities. Remember, there are sometimes US economic announcements at 3 pm London which can impact forex prices.
The London session is long, so there is no need to trade the whole session. The advantage of being a private trader is the ability to choose when you trade. When you begin trading the London session, try different times and then analyze your performance. Over time you will reduce your trade time and focus on when you have the best opportunity to profit.
