Due to the 24-hour nature of the Forex Market, trading is divided into four major sessions: Tokyo, Sydney, London, and New York.
Among these, the London session stands out as one of the most significant, characterized by high volatility and deep Liquidity in Market—making it a key player in shaping daily market trends.
As the Asian session wraps up, the European market opens, leading to a sharp rise in forex trading volume. This is largely due to both the geographic positioning of the session and the substantial volume of transactions executed during it.
Why Is the London Trading Session Important?
London has been one of the world’s major financial hubs. Thanks to its advantageous time zone, it plays a critical role in global markets. The London session operates from 8:00 AM to 5:00 PM (local London time).
This session overlaps with both the Asian and New York sessions, offering two key overlaps:
- Overlap with the Asian session during the early hours;
- Overlap with the New York session toward the end.
These overlaps result in increased trading volume and generally lower trading costs due to tighter spreads.
Key Characteristics of the London Trading Session
The characteristics of trading during the London session are as follows:
- Highest liquidity: Roughly 43% of all forex transactions occur during the London session;
- High volatility: The sheer volume of trades leads to significant market movement;
- Start of daily trends: Most price trends start during this session and continue into the New York session;
- Mid-session slowdown: Around noon London time, markets often experience a dip in volatility as European traders break for lunch;
- End-of-session reversals: Many European traders close positions toward the end of the session, potentially causing trend reversals.
Average Volatility of Currency Pairs in the London Session
The London session is known for its substantial volatility due to high trading activity. Here’s the average pip movement of major forex pairs during this session:
Average Volatility (Pips) | Currency Pair |
10 | USD/CHF |
22 | EUR/JPY |
22 | GBP/JPY |
16 | AUD/JPY |
6 | EUR/GBP |
8 | EUR/CHF |
10 | EUR/USD |
13 | GBP/USD |
19 | USD/JPY |
10 | AUD/USD |
9 | NZD/USD |
10 | USD/CAD |
Note: These values are based on historical averages and may vary depending on current market conditions.
Which Currency Pairs to Trade in the London Session?
Given the high trading volume, nearly all currency pairs are tradable during this session. However, some are better suited due to greater liquidity and tighter spreads:
- Major pairs like EUR/USD, GBP/USD, USD/JPY, and USD/CHF are ideal as they have high volume and low spreads;
- Cross pairs such as EUR/JPY and GBP/JPY are also popular for their volatility in the London session.
Conclusion
The London trading session is one of the most volatile and liquid sessions in forex, with overlaps with both the Asian and New York sessions. It starts at 8:00 AM London time and provides fertile ground for volatility-based strategies.
