The forex market is open 24 hours a day, five days a week, which means that you can trade currency pairs at any time of the day or night. However, the forex market is not equally active throughout the day, and there are certain times when the market is more active and volatile than others. One of the most important trading sessions is the London session, which is considered the most liquid and volatile trading session in the forex market.
The London session, also known as the European session, starts at 8:00 am GMT and ends at 4:00 pm GMT. This session overlaps with the New York session for a few hours, which makes it the most active trading session of the day. The London session is responsible for around 30% of the total forex trading volume, which makes it the largest forex trading session in the world.
The London session is especially important for traders who focus on trading the major currency pairs, such as EUR/USD, GBP/USD, USD/JPY, and USD/CHF. These currency pairs are highly liquid during the London session, which means that you can buy and sell them at a competitive price and with low spreads.
One of the reasons why the London session is so active is that it overlaps with the opening of the European financial markets, such as the Frankfurt and Paris stock exchanges. This means that traders in the London session have access to fresh economic data and news releases, which can have a significant impact on the currency markets.
Another reason why the London session is so popular among traders is that it is the time when the major banks and financial institutions in Europe open for business. These institutions are responsible for the majority of the forex trading volume, and their participation in the market can cause significant movements in the currency prices.
During the London session, traders can expect high volatility and fast price movements, especially during the first few hours of the session. This is because many traders and investors are trying to react to the news releases and economic data that are released during this time. However, the volatility usually starts to decrease as the session progresses, which can make it easier for traders to make more informed trading decisions.
When trading during the London session, it is important to keep an eye on the economic calendar and news releases, as these can have a significant impact on the currency markets. Some of the key economic data releases during the London session include the UK Gross Domestic Product (GDP), the Eurozone Consumer Price Index (CPI), and the German ZEW Economic Sentiment Index. These releases can cause significant price movements in the EUR/USD and GBP/USD currency pairs.
In conclusion, the London session is the most active and volatile trading session in the forex market. It is responsible for around 30% of the total forex trading volume, and it overlaps with the opening of the European financial markets and the participation of major banks and financial institutions. Traders who focus on trading the major currency pairs should pay close attention to the London session and the economic data releases and news events that occur during this time.
