Hello everyone!
I have another question that I’ve never known anyone to ask so far, that’s why I would like to ask it here on BabyPips!
Just by thinking logically, I thought about this: doesn’t it make sense that when a particular currency pair is trending (uptrend or downtrend, it doesn’t matter) it will move during the main market session (london session because in cus this session the currency pairs are most volatile) in that movement of the overall trend seen on the daily chart?
IF the trend continues, yes
they don’t always
you might say that they’re more likely to continue than not and therefore the odds are in your favor
but it isn’t as simple as that
you need to define “trend” carefully with reference to a timeframe, remembering that something can be trending one way in one timeframe and rannging or even trending the other way in another timeframe
Yes, most of the daily move by any forex pair occurs during the London session.
But you would need more information on how often this happens and how well price performs in your uptrends before you could commit to a strategy.
watch it happen 100 times, see how many times it does it.
Then watch it 200 more.
Then 1000.
Or put a position on it in a demo account daily and see how many trades win and how many lose.
Use your figures to see if there’s an edge or not
As with many things in trading, the answer is yes and no. And it also depends on what kind of trend you are looking at and how you are looking to trade it.
It is worth remembering that long term trends are driven by underlying fundamentals such as economic growth, inflation/interest rate expectations, international trade, central bank policies and so on. These factors play out over a long period of time, and if one is looking to take a corresponding position then each day’s single session movements are not so relevant.
It is also worth remembering that the volatility seen in the busy sessions, like London, is largely speculative and short term, e.g. scalping, intraday and swing trades (this is evident when volumes drop significantly on national holidays even though markets are open). These trading methods look much shorter term than the longer term traders, albeit they may also base/bias their trades in the trend direction. But they can also push the market in the opposite direction,short term, purely based on the “flavour of the day”.
The combination of these two factors means that, although the London session may produce the widest range and volumes, the direction will not always be in the same direction as the underlying trend. There are up days/sessions and there are down days/sessions within every long trend. The stock market indices provide a good example of this, as does the SW trading thread on this site.
So if one is thinking of only day trading the London session and always in the long term trend direction, it will not always work out like that. These pullbacks/consolidations may be good times to enter, or build on, long term positions, but are not so friendly for day traders.