The morning session of the London market (from 8 to 11 AM GMT) is a critical period known as the "Kill Zone," where significant liquidity manipulation occurs by market makers and major financial institutions. During this period, the main market trends are determined by breaking false support or resistance levels, attracting speculators and trapping them in losing trades before the trend suddenly reverses.
Key points:
1. Manipulation of liquidity:
- Market makers aim to attract the largest number of buy/sell orders at specific price levels, then suddenly change direction, causing severe losses for inexperienced traders.
- Strategies like "Smart Money Concept" are used to create rapid price gaps, especially in major currency pairs (like Euro/USD and Pound/USD).
2. Risks and gains:
- This period is characterized by high liquidity and sharp volatility, which can lead to significant gains or catastrophic losses that can wipe out traders' accounts within minutes.
- It is advised to use stop loss orders to avoid bankruptcy.
3. Market behavior:
- The early hours of the session are seen as a "battlefield" between major institutions and individual traders, where the main trends for the day are determined based on liquidity movement.
- Economic news (such as unemployment data or interest rates) is often used as a tool to provoke volatility.
4. Tips for traders:
- Focus on monitoring liquidity movement and avoiding random trading.
- Pay attention to the break of false levels drawn in the first hour of the session, which may be mere traps to catch traders' orders.
In short, the morning London session is not for beginners; it requires a deep understanding of "smart money" movements and the ability to handle high risks in a market that resembles dancing on the edge of a knife.