ICT Mentorship Core Content - Month 08 - When To Avoid The London Session

3 min read 1 year ago
Published on Aug 05, 2024 This response is partially generated with the help of AI. It may contain inaccuracies.

Table of Contents

Introduction

This tutorial focuses on understanding when to avoid trading during the London session, based on insights from the ICT mentorship program. Knowing when not to trade is as crucial as knowing when to enter the market, as it helps traders avoid unfavorable conditions and increases the probability of successful trades.

Step 1: Recognize Large Range Days

  • Avoid trading the London session after a day with a range greater than two times the average five-day range for that currency pair.
  • Check the previous day's trading range and compare it to the five-day average. If it's significantly larger, consider staying out of the market.

Step 2: Understand Daily Close Patterns

  • After three consecutive up closes on the daily chart, avoid long trades in the London session. Expect possible retracements.
  • Conversely, after three consecutive down closes, avoid short trades for similar reasons. Be cautious of potential deep retracements or sideways movements.

Step 3: Be Cautious Around Key Economic Events

  • Avoid trading London session immediately following an FOMC event that leads to extreme whipsaw price action. Watch for unpredictable market behavior post-announcement.
  • On the first Friday of each month, leading into non-farm payroll reports, refrain from trading the London session.
  • Avoid trading on days leading into a long weekend or holiday, as many traders may exit the market early, leading to low liquidity.

Step 4: Monitor Economic News Releases

  • Check economic calendars (such as Forex Factory) for multiple high or medium impact news events scheduled for the London session.
  • If several significant news events are lined up, it could lead to a volatile and unpredictable trading environment.

Step 5: Observe Central Bank Dealers Range and Asian Range

  • If the Central Bank dealers’ range exceeds 50 pips, consider avoiding the London session. A narrow consolidation range is preferable.
  • Look for a calm and narrow Asian range before the London open. If the Asian range is wide or erratic, it may indicate a challenging trading session ahead.

Step 6: Identify Market Trends Before London Open

  • If the market is trending from 8 PM New York time, this can lead to a sloppy London session. Ideally, you want to see a consolidation rather than a sustained trend.
  • Assess the market profile from the previous day to ensure that it aligns with a favorable trading setup.

Conclusion

Understanding when to avoid trading the London session is essential for day traders. By recognizing large range days, daily close patterns, key economic events, and observing market ranges, traders can filter out unfavorable conditions and focus on high-probability scenarios. Always remember to maintain discipline and stick to your trading rules for the best chance of success.