By Nathan Boardman
One of the standout features of the forex market is its round-the-clock availability. The Forex Market allows traders from around the world to engage in trading during regular business hours after their work commitments. During that particular session, the forex market appears to exhibit a higher level of volatility.
Multiple currency pairs exhibit dynamic movement throughout different periods of the trading day due to the collective presence of market participants who are actively engaged online during those specific times. We must recognize the close connection between the critical trading sessions in Forex and the market hours.
There may be instances in Forex trading where opportunities are overlooked, or even worse, when a sudden surge in market volatility causes the position to move against the trader’s favor when they are not present. To reduce such a risk, a trader should be aware of when the market is typically volatile and, therefore, determine the most suitable times for their specific trading strategy and style.
London Trading Session
As the trading day progresses, just before the Asian trading hours come to a close, the European session takes charge to keep the currency market active. This particular time zone for Forex trading is highly concentrated and encompasses multiple critical financial markets. London has been chosen to determine the parameters for the European gathering.
The official operating hours in London are from 07:30 to 15:30 GMT. The trading period has been extended due to the presence of other major financial markets (including France and Germany) before the official opening in the UK. In contrast, the end of the trading session is delayed as uncertainty persists until London closes. Therefore, the trading hours for Forex in Europe are typically observed from 07:00 – 16:00 GMT in order to engage in trading Forex Products.
What Time Does the London Market Open?
The London Forex market session takes place from 3:00 AM ET to noon ET.
The market opens at 3:00 AM and closes at noon. During the Asia Session, there is an overlap from 3:00 AM to 4:00 AM. Additionally, there is an overlap with the New York Session from 8:00 AM to 12:00 PM.
Specification for the London Trading Session
The London Session Is a Lively and Quick Session
The Tokyo market’s slower pace will result in the London meeting, causing brokers to witness heightened volatility as costs shift from liquidity suppliers based in the United Kingdom.
On several major currency pairings, the ‘average hourly move’ will often increase as expenses come in from London. A time-of-day analysis of the EUR/USD is presented below. In most cases, it happens after the Asian meeting is over.
The effectiveness of breaking support and resistance levels could be higher than during the Asian session when volatility is often lower.
Traders utilizing the London Session approach must grasp these concepts in order to take advantage of breakout trading and profit from this volatility. Breakout trading involves keeping an eye out for sudden, significant price changes that might persist for a while.
Check Out the Overlap
The ‘Overlap’ refers to the 8 AM to 12 PM ET time frame when the US and London meetings precisely coincide. During this four-hour window, a great deal of liquidity enters the market in the two biggest marketplaces on Earth, causing enormous and sudden fluctuations.
When the New York and London FX sessions overlap between 8:00 AM and 12:00 PM ET, volatility peaks, and traders can use a breakout technique to place trades. This technique capitalizes on the increased volatility seen during the overlap.
Increased Liquidity
The forex gathering in London is renowned for its high liquidity and dynamic trading environment. Due to the large amount of buying and selling activity, significant currency pairs have the potential to trade at highly narrow spreads. Casual investors looking to capitalize on quick market shifts may be interested in identifying trends and breakout opportunities to trade, aiming to minimize the amount they spend on spreads.
Optimal Timing for Trading in the Market
The first three hours of every vital meeting are typically the most impactful in terms of intensity, trend, and reversal. That’s when traders usually find the most favorable trading opportunities. In addition, the TOTH (Top Of The Hour), the initial and most recent five minutes of each hour, tends to bring about volatility and erratic market movements.
Summary
When trading Forex, a market participant must determine whether high or low volatility aligns better with their unique trading approach. If the importance of value activity is higher, trading, meeting deadlines, or adhering to regular financial delivery times may be the optimal choice. The first step is to determine the optimal Forex trading hours or times to trade, taking into account the tendency for volatility. Traders seeking significant volatility should identify the specific periods that are typically active for the currency pair offered by the Forex brokers.
