There are several characteristics of the London trading sessions. Generally, major currency pairs trade in high volumes. The overlap between these sessions tends to affect EUR/USD, USD/JPY, and GBP/USD the most. Inter-bank activities also play a role. Traders with an active account will find these times to be favorable. In this article, we will examine the different characteristics of the London trading sessions and their importance in the global currency market.
First, volatility increases. Traders can take advantage of larger price moves during this time. Second, this session has the highest volume of market participants. However, this increased volume also brings increased risk to the market. In addition, traders check Asian session results and other important news in order to make trading decisions. Hence, the London trading session is one of the most active. In addition to being a major trading session, the London trading session also features a significant number of important economic events.
Third, London is a global financial center. Trading during the European session is the most volatile. Short-term traders typically hold positions over a period of hours. Then, as the trading session ends, the European session overlaps with the New York trading session. This overlap creates a window of time between three and four hours when liquidity is at its greatest. These characteristics make London the preeminent financial hub.
Fourth, London trading sessions are the largest. European investors will often hold positions during this time and take profits before the New York trading period. As the London trading session is one of the most volatile trading sessions, the major currencies will likely be taken at the opening and closing of this session. These major pairs will often open at different levels and close at different times during the European session. In addition, the volatility can change slightly as the session ends.
In general, the European session tends to have higher liquidity than the Asian session. Almost 38% of trading volume occurs during the European session. Traders should ensure they have sufficient rest in order to be prepared for volatile market conditions. While there are a lot of benefits to trading at the European time, the importance of physical well-being should not be underestimated. If not, sleep deprivation could lead to errors of judgment.
When the Asian session ends, the European time zone takes over the currency market activity. Various key financial markets are active during the European session, which is often compared to the London trading session. This session is also the most liquid, since the euro zone members are open during London time. The currency pair EUR/GBP is typically traded during this time. A number of factors determine whether a currency will rise or fall during the London trading session.
The euro is traded in greater volume during the day when European businesses are open. At night, when European businesses are closed, they do not trade with foreign companies. At that time, the volume of euro trading is lower, but the price of euro also increases. As a result, the price of the euro fluctuates a lot during the London trading session. Traders should focus on this time period to maximize their profits.