What is FX London Time? Characteristics and Trading Methods (Explanation of Important Points)
When beginning foreign exchange trading (Forex), traders are most concerned with the appropriate trading hours to take full advantage of market activity. London time, in particular, is one of the world's leading forex markets, and many traders look to it for active quotes. So what exactly is London time?
This article provides a detailed explanation of the London time, from a basic understanding of the London time to its characteristics, trading techniques, and what to watch out for.
By reading this article, you will learn effective trading techniques to take full advantage of the unique features of London time. We will also discuss trading strategies to maximize profits without missing the most active market hours. We will also look at the mistakes and pitfalls that traders often make and how to avoid them.
Understanding London time is an important step toward trading success. By reading this article, you will be able to trade with more confidence and learn to ride the waves of the market.
First, we will explain in detail what London time is.
What is FX London Time?
Knowing the proper trading hours is essential to success in Forex. One of the most important time zones is "London time".
In conclusion, London time is the main trading time zone in the United Kingdom. The London market is one of the three largest markets in the world, and it is the time when the Japanese, European, and U.S. markets overlap. This is the time when market trading volume is at its highest and many traders are actively trading.
Let's look at specific trading hours and overlap with other markets.
Trading hours (summer and winter)
London time trading hours Japan time 17:00 - 26:00 (summer time: 16:00 - 25:00)
Daylight saving time and winter time are systems designed to accommodate variations in daylight hours. Many countries, including the United Kingdom, have adopted this system because daylight hours vary greatly with the seasons.
In the UK, we usually switch to daylight saving time on the last Sunday in March and back to winter time on the last Sunday in October. In Japan time, the London market opens for trading at 16:00 during summer time and at 17:00 during winter time. With the change to daylight saving time, the time for the release of economic indicators changes, as well as the time of day when the market moves.
The period before and after the start of trading in the London market is a time of great volatility in the currency markets. Breakout and short-covering moves targeting stop-loss orders are more likely to occur. Simply being aware of the times before and after the opening of the London market can help you avoid unnecessary risks. The changes in summer and winter time are also sent out in the "NEWS" section of our ThreeTrader website, so it is recommended that you check it once in March and October.
Overlap (Asia time and New York time)
Overlap time of major markets
In forex trading, the "overlap" time period, when markets overlap with each other, is very noteworthy. In particular, although the Tokyo and London markets do not have strict opening hours, the period between 16:30 and 18:30 (15:30 and 17:30 in summer time) is generally a time when trading volume increases and volatility may spike. In particular, at 16:00 JST (15:00 in summer time), before the London stock market starts, there are many important economic indicators released in the U.K., which often increase volatility, especially for the pound dollar and pound yen.
On the other hand, the London and New York markets overlap from 10:00 p.m. to 2:00 a.m. (9:00 p.m. to 1:00 a.m. in summer time). This is the most active trading period of the day, as U.S. economic indicators are often released at 10:30 p.m. (9:30 p.m. in daylight saving time).
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FX London Time Features
London time is a very important time zone in the foreign exchange trading market and has attractive features for many traders.
First, one of the most important characteristics of London time is that the average volume of currency trading is significantly higher than in other markets. The London market is the main trading center for European currencies and is the market of choice for traders around the world. The advantage of this large trading volume is that spreads tend to be narrower and trading prices more stable than in other time zones.
In addition, the timing of the release of major economic indicators and important events in Europe often causes the market to move significantly. Trends often develop or shift rapidly. Let's take a closer look at each of these characteristics.
Average foreign exchange trading volume is higher than other markets
The London market is known as the center of foreign exchange trading and is characterized by high trading volumes. With London traders participating in the market, trading volume increases dramatically. In fact, it is estimated that over 30% of all FX trading worldwide is conducted in the London market. This high trading volume is a factor that increases the liquidity of the market. As liquidity increases, spreads tend to narrow and even large position volumes are easier to execute. These characteristics can be said to provide a very favorable environment for traders.
European currency pairs become more volatile
Volatility is particularly pronounced for European currency pairs such as the pound dollar (GBPUSD), euro dollar (EURUSD), pound yen (GBPJPY), and euro yen (EURJPY). This coincides with the release of important economic indicators from the EU and the U.S., and it is not uncommon for the direction of the market to change abruptly. In addition, events that attract market attention, such as announcements of inflation and employment rates and statements by key figures, are also concentrated during this time period.
These factors make the London time period an important time for trend formation, so much so that it affects the Tokyo market the next day.
Trend is likely to occur or change
The trading hours of the London market are frequently marked by the emergence of trends and their turning points. The main reason for this is that many economic data and key figures are released during this time, which can quickly accelerate market trends.
In particular, during the hours when the London and New York markets overlap, large volumes of transactions from around the world are concentrated, resulting in large inflows and outflows of funds. Under these conditions, it is not uncommon for new trends to form, and signals that an existing trend is about to change can easily occur. Traders can maximize their profit opportunities by closely monitoring the movements during this time period and taking positions at the right time.
Effective Trading Methods for Forex London Time
London time is one of the largest and most active forex trading hours in the world, a time when trading opportunities are abundant. For traders, having effective trading techniques during this time is an important success factor. This section provides an in-depth look at effective trading techniques for London time.
Let's quickly look at specific trading techniques.
Breakout after the start of the London market
London time breakout technique
After the start of the London market, the likelihood of a breakout increases, especially if a range has formed in the Tokyo market. This breakout tendency is often greater the narrower the range.
When trading, check the positioning of the long-term and short-term moving averages, and if you feel that this favors the direction of the expected breakout, consider when to enter. However, since false moves can also occur, caution should be exercised in this regard.
Pushing and returning to the market by taking advantage of damashi
A method to take advantage of the London time dummies
It is well known that dummy moves frequently occur immediately after the start of the London market.
In particular, when a breakout occurs in the opposite direction of a major daily trend, you can take advantage of the damashi to set up a push or return trade. However, the period of damashi may last until just before the New York market, so be very careful about the amount of positions you take.
Because this technique is short-term and contrarian, it is important to always set a stop loss to manage risk.
Targeting short-term trends before the London Fix
From the time after the release of the New York economic indicator to the London fix, the possibility of a short-term trend increases. During this time frame, an effective strategy is to consider entering the trend direction based on the release of the U.S. economic indicator and closing just before the London fix. Before trading, it is best to check currency strengths and weaknesses and identify the strongest and weakest currencies in the market. Trading currency pairs that contain the dollar is recommended, especially when based on U.S. news.
FX London Time Notes
London time is a very attractive time for many traders, but at the same time there are some points that require attention. In this section, we will discuss some important points to be aware of during London time. By understanding these points of caution, you will be able to minimize your trading risks.
- Decrease in trading volume during UK holidays
- Price movements during the London Fixing (London Fix) time period
- High volatility in the overlap between London and New York time
First, forex trading volume tends to decrease on UK holidays. On UK national holiday and public holidays, the London market closes, which reduces trading volume and market liquidity. This makes it necessary to watch out for widening spreads and sudden price changes.
Second, price movements are more likely to be affected during the London Fixing (London Fix) period. London Fixing is a series of transactions that take place before the London market closes for business and is the time period during which price decisions are made. During this time, market turbulence is likely to occur, so traders should trade with caution.
Furthermore, price movements tend to be even more intense during the overlapping London and New York time periods. Because the London and New York markets, the world's largest foreign exchange markets, are actively trading at the same time, market movements can change rapidly. Risk management against market fluctuations is important during these hours.
Let's take a closer look at each of these precautions.
British holidays reduce trading
Foreign exchange trading activity declines on UK holidays, especially bank holidays and public holidays. At these times, major trading players are away from the market, resulting in less liquidity than usual and market instability. It will also be harder to predict the direction of the market, as even minor news and events can cause prices to move significantly. These days involve different risks than normal days and require adequate risk management, especially when considering entering new trades.
Susceptible to London Fixing (London Fix)
London fixing refers to the time period around 1:00 am Japan time (midnight daylight saving time). Because of the large volume of trading that occurs around this time, prices fluctuate greatly in a short period of time. During this period, normal analysis and technical indicators may not work as well. The London fixing determines the price of gold, and since gold is denominated in US dollars, it also affects the FX market.
Price movements are even more intense during the overlap with New York time
Volatility is often particularly high during the hours when the London and New York markets overlap. At this time, economic indicators, news, and trading orders from both markets come in rapid succession and volatility increases. Since the direction of the trend can be determined, short-term traders, such as 5-minute traders, can aim for large price spreads by trend-following.
Frequently Asked Questions about FX London Time
What is the difference between London time and New York time?
A. London time is focused on European currency pairs, while New York time is focused on straight dollar currencies.
There are some notable differences between forex London time and New York time. Before and after London time, it is common to see "false moves" that are opposite to the trend in the Tokyo market. It is also characterized by sudden shifts in the direction of the trend, targeting stop losses in Tokyo time. New York time is easily influenced by the release of U.S. economic indicators, and when strong fundamental factors are present, the trend can be very strong. While trends tend to continue during London hours, it is not uncommon for the market to be range-bound after London fixing.
What is the difference between FX London time and Tokyo time?
A. While London time tends to be characterized by large trading volume and trends, Tokyo time tends to be range-bound, especially for the dollar-yen.
The main difference between Forex London time and Tokyo time is in the central currency pairs. In Tokyo time, the main currency pairs are the dollar-yen and Oceania currency pairs, whereas in London time, the main currency pairs are the euro-dollar, pound-dollar, and other European currency pairs and the dollar-yen. The London market is characterized by the tendency for trends to progress in one direction, and if a range formation is seen during Tokyo time, the possibility of a subsequent breakout increases.
What are Threetrader's trading hours?
A. For FX currency pairs, trading hours are 24 hours a day, 5 days a week. Trading hours vary depending on each CFD issue.
At Threetrader, trading of forex currency pairs can be done 24 hours a day, 5 days a week, except during rollover hours. Particular attention should be paid to the rollover hours, during which swap points are awarded every morning. Trading hours for CFD issues, on the other hand, vary, but details can be found on MT4.
Summary｜FX London Time
In this article, we have discussed the London time in Forex. London time is the time of day when one of the world's largest foreign exchange markets is active and is an important factor for many traders.
London time is an attractive time for market activity and market price movements. At the same time, however, there are certain aspects that require caution. By learning proper trading techniques and risk management, you can make the most of London time and trade successfully.
Maximize your returns by practicing effective trading techniques while taking into account the precautions outlined in this article.
