Best Forex Pairs to Trade During the London Session

Imagine this: it’s early morning in London, and the financial markets are waking up with the rush of activity that comes with the opening of one of the world’s most powerful financial hubs. The London session, known for its volatility and vast liquidity, is where traders from all corners of the globe converge to make some of the most lucrative trades. The real question isn’t whether to trade but which currency pairs are optimal for this unique trading window.

Let’s not beat around the bush—the EUR/USD pair stands tall as the king of the London session. The Euro and the US Dollar are both heavily traded, and during London hours, you’ll often see an influx of market-moving economic reports from Europe and the United States. The mix of volatility, high liquidity, and low spreads makes this pair the top pick for any serious trader. What’s interesting is the EUR/USD tends to have the most pronounced moves during London’s overlap with the New York session, creating ample opportunities for both scalpers and day traders.

But there’s a lesser-known gem: the GBP/USD. The British pound is intrinsically linked to London, and naturally, it sees the most action during its local session. Combine the liquidity of the USD with the local insight and volatility of the pound, and you’ve got a dynamo of a trading pair. It’s a bit more volatile than EUR/USD, but for those who can handle the wild swings, it can be highly rewarding. Key economic reports like UK employment data or GDP numbers often release during this session, giving the GBP/USD pair an added punch.

Now, let’s look beyond the obvious. Have you ever considered the EUR/GBP? This pair doesn’t follow the conventional wisdom of picking pairs with the USD, but it’s highly responsive to events out of both the UK and the Eurozone. The EUR/GBP can act as a hedge against the volatility in USD-based pairs, allowing traders to profit from news events with relatively less risk.

A more exotic choice would be the USD/JPY. Typically, the Asian session is when this pair is most active, but it carries momentum into the London session, particularly during moments of overlap with European markets. The Bank of Japan’s policy updates or US economic reports can stir movement, making it another exciting option.

For the more adventurous traders, there’s always the GBP/JPY. Known for its extreme volatility, this pair is not for the faint-hearted, but the opportunities for large profits are undeniable. When the London session overlaps with Tokyo, this pair can see explosive moves, especially with political or financial news driving the pound or yen.

Now, here’s a strategy to consider: timing your entries based on the first hour of the London session. Often called the “London Breakout,” this strategy revolves around the observation that currency pairs, particularly EUR/USD and GBP/USD, often form a range during the Asian session, which then breaks out when London opens. With the massive influx of orders, these breakouts can be highly profitable if you time them right.

But why does the London session carry so much weight? London has historically been the center of foreign exchange, with nearly 40% of the world’s forex transactions flowing through its trading desks. Liquidity is king, and with so many major financial institutions operating in London, this session tends to offer better pricing and lower spreads, which are music to a trader’s ears. Not only that, but it also overlaps with the Asian and New York sessions, making it the most active trading period of the day.

However, let’s not forget the risks. While high volatility means big opportunities, it can also mean significant losses. The spread widening during news releases, particularly in pairs like GBP/USD, can lead to slippage, meaning your entry or exit point isn’t exactly where you planned it to be. Always be prepared with proper risk management and a stop-loss strategy, especially when trading pairs known for their volatility.

Data analysis shows that on average, the EUR/USD and GBP/USD pairs tend to move between 80-100 pips during the London session. This is in stark contrast to the Asian session, where movements are often more subdued. If you are looking for more consistent and stable movements, then EUR/USD is your pair. However, if you prefer the high volatility and larger movements that offer big profit potential, then GBP/USD might be more up your alley.

Let’s throw in a real-world example. Picture this: On a day when both the Eurozone’s GDP and the US non-farm payrolls are released, the EUR/USD pair can swing by as much as 150 pips within hours. A savvy trader could capitalize on these moves with proper technical analysis, riding the waves of market sentiment for significant gains.

But the real trick isn’t just in picking the right pairs. It’s in your preparation. Understanding the news flow, being aware of upcoming reports, and using tools like economic calendars are key to profiting in the London session. Ignoring fundamentals in favor of technicals can work in slower sessions, but during London, the news can change the entire landscape in a heartbeat.

In summary, trading during the London session offers unmatched liquidity, volatility, and opportunity. Whether you stick with the bread and butter of forex trading, EUR/USD, or venture into the riskier waters of GBP/JPY, the opportunities are immense. The key is preparation, understanding the pairs you’re trading, and using a solid risk management strategy. Don’t just dive into the action—navigate it with precision, and the London session can become your playground for financial success.