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London fix

The London fix is a set time of day at which foreign exchange market makers, including banks and other large financial institutions, agree on the price of a particular currency pair. This price is then used to trade the currency pair between market makers and other clients, and is intended to provide a fair and consistent price for the currency pair. The London fix is at 4 pm in London, which is typically 11 am in New York but that can vary depending on daylight savings time schedules. At times, trading flows just before the London fix overwhelm the foreign exchange market and push the prices of currencies, at times substantially. This can happen at periods of the year when liquidity is low or the flows into the fix are unusually large. Fixing moves are most common near the end of the month, quarter and year.The first way to tell if flows around the London fix are driving the market is via the clock. Typically, moves start 20-30 minutes before the fix (though at times later and at time as much as an hour earlier) and peak right at the top of the hour. You will want to be careful to make sure that no news has hit in the same time period as it's not always easy to tell the difference between a fixing move and a news-driven move.It's nearly impossible to predict fixing moves and frontrun them without direct information from a bank desk and that kind of information is now extremely rare.The trading rule of thumb at the London fix is to fade any oversized moves if you're confident they're on flows and not news. At times M&A deals can be a sign of fixing demand and can have a larger effect in a less-traded currency and if you see a large cross-border merger announcement, look out for fixing flows. Here is an example of a case of M&A driven fixing demand in the Canadian dollar: https://www.forexlive.com/news/now-the-dots-are-connected-on-the-big-canadian-dollar-drop-today-20221129/ However in that case the demand continued until the London close, which is an hour after the fix before reversing.The best way to spot fixing moves is by experience and reading ForexLive carefully. We often flag moves that look like they're from fixing demand, not flows. Again, the best trades here are to fade oversized moves but like all trades, risk management is essential.

At times, trading flows just before the London fix overwhelm the foreign exchange market and push the prices of currencies, at times substantially. This can happen at periods of the year when liquidity is low or the flows into the fix are unusually large. Fixing moves are most common near the end of the month, quarter and year.

The first way to tell if flows around the London fix are driving the market is via the clock. Typically, moves start 20-30 minutes before the fix (though at times later and at time as much as an hour earlier) and peak right at the top of the hour. You will want to be careful to make sure that no news has hit in the same time period as it's not always easy to tell the difference between a fixing move and a news-driven move.

It's nearly impossible to predict fixing moves and frontrun them without direct information from a bank desk and that kind of information is now extremely rare.

The trading rule of thumb at the London fix is to fade any oversized moves if you're confident they're on flows and not news. At times M&A deals can be a sign of fixing demand and can have a larger effect in a less-traded currency and if you see a large cross-border merger announcement, look out for fixing flows. Here is an example of a case of M&A driven fixing demand in the Canadian dollar: https://www.forexlive.com/news/now-the-dots-are-connected-on-the-big-canadian-dollar-drop-today-20221129/ However in that case the demand continued until the London close, which is an hour after the fix before reversing.

The best way to spot fixing moves is by experience and reading ForexLive carefully. We often flag moves that look like they're from fixing demand, not flows. Again, the best trades here are to fade oversized moves but like all trades, risk management is essential.