When Asian market players are winding down for the day, their European counterparts are just getting started.
While there are other financial centers around Europe, market participants keep their eyes on London. Because of its strategic location, London has traditionally been a center of trade.
London now benefits from its time zone. The morning in London overlaps with late trade in Asia, while the afternoon in London overlaps with New York City.
It’s no surprise that it’s regarded the world’s forex capital, with thousands of people transacting every minute.
London accounts for around 43% of all FX transactions.
The London session is also known as the “European” trading session by some traders.
This is because, in addition to London, important financial centers have opened in Europe, including Geneva, Frankfurt, Zurich, Luxembourg, Paris, Hamburg, Edinburgh, and Amsterdam.
The table below shows the London session pip ranges for the major currency pairs:
These pip values were generated using historical data averages. Please keep in mind that these are NOT FIXED PRICES and may vary depending on liquidity and other market circumstances. Furthermore, the EUR/CHF session range has not been included because the Swiss franc was tied to the euro at 1.2000 during the period.
Here are some interesting facts regarding the European Session:
Because the London session overlaps with the other two major trading sessions, and because London is such an important financial hub, a considerable portion of FX transactions occur during this time. This results in more liquidity and possibly lower transaction costs, i.e. lower pip spreads.
Because of the high volume of transactions, the London trading session is typically the most volatile.
Most trends begin during the London session and typically last until the start of the New York session.
Volatility tends to decrease in the middle of the session, as traders frequently head off to eat lunch before the New York trading hour begins.
At the close of the London session, trends can sometimes reverse when European traders seek to lock in winnings.
Which Pair Should You Trade?
Because of the volume of transactions that occur during the European session, there is so much liquidity that practically any pair can be traded.
Of course, the majors (EUR/USD, GBP/USD, USD/JPY, and USD/CHF) typically have the tightest spreads.
Furthermore, it is these pairs that are typically directly influenced by any news stories released during the European session. You can also attempt yen crosses (particularly, EUR/JPY and GBP/JPY), which are quite volatile at the moment.
However, because these are cross pairs, the spreads may be a little wider.
Next Lesson: When Can You Trade Forex: New York Session