When it comes to forex trading, the London trading session is one of the most active and volatile sessions of the day. It spans from 8:00 am to 4:00 pm GMT and overlaps with both the Asian and New York trading sessions.
With so much activity, traders often wonder what they should be trading during this time. In this article, we will discuss some of the most popular instruments to trade during the London session.
Currency Pairs
The forex market is open 24 hours a day, but each trading session has its own characteristics. The London session is known for its high liquidity and volatility, making it an ideal time to trade major currency pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/CAD, and NZD/USD. These currency pairs have tight spreads and are heavily traded during this time.
EUR/USD
The EUR/USD is one of the most actively traded currency pairs in the world. It represents the value of one euro in US dollars. The euro is the second most traded currency in the world after the US dollar, while the US dollar is considered as a primary reserve currency.
GBP/USD
The GBP/USD pair represents the value of one British pound in US dollars. This pair can be highly volatile during major news events related to Brexit negotiations or economic data releases from either country.
Indices
Indices represent a basket of stocks that are grouped together based on various criteria such as size, industry sector, or geography. During the London trading session, indices such as FTSE 100 (UK), DAX 30 (Germany), CAC 40 (France), and Euro Stoxx 50 (Eurozone) are popular among traders due to their high liquidity and volatility.
FTSE 100
The FTSE 100 index represents the top 100 companies listed on the London Stock Exchange by market capitalization. It is heavily influenced by the performance of the financial and mining sectors.
DAX 30
The DAX 30 index represents the top 30 companies listed on the Frankfurt Stock Exchange by market capitalization. It is heavily influenced by the performance of the automotive and manufacturing sectors.
Commodities
Commodities such as gold, silver, and crude oil are also popular instruments to trade during the London session. These commodities are highly liquid and have a significant impact on global markets.
Gold
Gold is considered a safe-haven asset during times of economic uncertainty. It is often used as a hedge against inflation and currency fluctuations.
Crude Oil
Crude oil is one of the most actively traded commodities in the world. Its price is heavily influenced by global supply and demand dynamics, political tensions, and economic data releases.
- In conclusion, traders should focus on highly liquid instruments during the London trading session to take advantage of its volatility.
- Currency pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/CAD, and NZD/USD offer tight spreads and high liquidity.
- Indices such as FTSE 100 (UK), DAX 30 (Germany), CAC 40 (France), and Euro Stoxx 50 (Eurozone) are popular due to their high liquidity.
- Commodities such as gold, silver, and crude oil are also highly liquid instruments that can offer opportunities for traders during this session.
With proper risk management strategies in place, traders can take advantage of the London session’s volatility to potentially profit from their trades.