The 7 a.m. London air pocket

[Fairman]

The 7 a.m. London air pocket

Between the end of the Asian session and the real start of London, there is a stretch where the market has the worst of both worlds. Tokyo desks are winding down. London desks are just sitting down with coffee. Liquidity on the majors thins out, and spreads often creep up even though no news is scheduled.

What happens in this window is more mechanical than most people assume. Early European banks begin to quote, but their risk limits are low until the morning meeting is done. Algorithms that were running on Asian flow start to fade out. The few orders that arrive have outsized impact, so price makes quick jumps with nothing behind them.

For scalpers this has several side effects. Indicators calibrated on the Asian session range suddenly produce signals that look like breakouts, and then reverse within a minute or two. Stops placed just beyond the Asian high or low get tagged by the first real London order, and the tag is often followed by a sharp move the other way. That move is the one that tempts people to chase.

Some observations that tend to hold:

- The first big candle after 07:00 GMT is frequently a fake
- The second move, after the first retrace, tends to be cleaner
- Spreads on crosses like EURGBP and GBPJPY are noticeably worse than on EURUSD for the first 15 to 20 minutes

None of this is a rule written in stone. It is a pattern that repeats often enough to be worth recording.

A simple experiment: skip trades until 07:20 GMT for a month, then compare with the usual results. Cost savings alone sometimes justify the habit, even before looking at win rate.

Does the first London move tend to hold or reverse on the pairs being traded, and has anyone counted how often?