- June 5, 2022
- Posted by: Forex Wiki Team
- Category: Forex Trading System
Discover how to trade the London Breakout Strategy and how to outsmart smart money. We're going to show you a day trading method that our London traders have utilized effectively. The london breakout strategy trading method includes hidden trading principles that may be used in the Forex market.
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London breakout strategy is a term that everyone is familiar with. Breakout trading methods aim to spot price swings that are "breaking" from a predicted range, as the name indicates.
Bollinger Bands and other technical indicators can be used to capture these ranges.
Breakouts are, in fact, one of the most often used trading methods.
Market prices (for Forex currencies, futures, stocks, commodities, and cryptocurrencies) are continually shifting from trends to ranges and vice versa.
And the only way for the price to move from a range to a trend is for it to break out of its range.
This trading tutorial will teach you about a specific breakout technique known as the London open breakout approach.
We'll disclose some trading secrets to assist you in implementing the opening range breakout approach into your own trade.
First and foremost, let me define the London open approach.
Take a look at the following:
What is the London breakout strategy?
Simply said, the London Breakout Strategy plan is a day trading technique that aims to profit from the trading range that exists before to the London opening session.
Because London is in a different time zone than New York, the market opens many hours before the New York exchanges. This provides traders with a once-in-a-lifetime opportunity to enter fresh positions.
This is also known as the London daybreak approach among retail traders.
The open day trading approach is as follows:
Buying above the London trading range and holding a long position
Taking a short position below the London trading range is a good way to make money.
Basically, you'll learn how to trade the London open with this day trading approach.
The PDF of the London breakout strategy has been circulating for decades.
The London Forex session was exploited by smart money to profit from predicted breakthrough signs.
The secret has now been divulged to the whole public.
Retail merchants, on the other hand, are still in the dark.
Allow me to explain...
To day trade the London open successfully, you must first grasp how a security's price is established.
The fact about trading is that it takes the correct mindset to put a trading plan into action.
So, what are your options?
First and foremost, keep reading the London trading handbook.
The missing link to properly trading the London opening range breakout method will be revealed by our team of industry specialists.
But first, let's look at how the London trading range is defined.
Let's get started!
What Is the London Trading Range and How Do I Define It?
We'll look at two ways of determining the London trading range.
Using the high and low of the previous trading session, termed the Asia trading session, is the most simple way of determining the London range.
This strategy considers the whole price movement since the start of a new trading day.
The benefit of this strategy is that it will assist you in better managing your transaction.
The second approach for determining the London trading range excludes candle wicks and instead concentrates on closing prices.
Note: This trading strategy works well when combined with Asian currencies such as the USD/JPY.
This is a unique approach that has its own set of advantages.
Allow me to explain...
The majority of trade volume takes place within the candle's body. So, by ignoring the wicks, we can maintain our attention on the true action.
This is something I'm sure no one told you!
However, there is a significant benefit that comes with it.
First, you'll avoid false breakouts, and second, you'll be able to join the big players in the market sooner.
Let's have a look at some of the reasons why the London open is such a valuable tool now that we've covered how to create the London trading range.
This will help you to feel more confident about your trade.
You'll fail as a trader if self-doubt and hesitancy take over your trading mentality.
So, let's get this straightened out.
Take a look at the following:
Why Does the Open Breakout London Strategy Work?
When London opens at 8:00 a.m. GMT, there is usually a lot of volatility in the first few hours.
This is true of practically all major financial hubs across the world, but especially of the London and New York open markets. The biggest forex volume is usually seen during these two trading hours.
Please see our Forex Beginner's Guide for further information on the Forex trading session.
The main banks and financial institutions begin their workday at this hour.
Everyone has their own set of requirements.
Allow me to explain...
Banks will account for a large portion of the trade volume, as they endeavor to suit their corporate clients.
As a result, trading at the London or New York open will undoubtedly result in more volatility.
In other words, this is your best opportunity to profit from trading.
Because higher volatility equals more trading chances.
In this time window, the majority of trade activity will be compressed. If you miss your entrance and a trend develops as a result of the London opening range breakout, the market will not offer you another chance to enter the trend.
That is one of the reasons why the London Breakout Strategy forex trading method is so effective.
Make sure to keep an eye on the opening hour of the London trading day.
That's a terrific place to start if you want to take on the market alongside smart money.
Our team of professionals conducted a thorough backtest of the London breakout strategy and discovered the ideal time frame for profitable forex trading. Act immediately since the window of opportunity is quite small.
The following is how it works:
When is the best time to trade the London Open Strategy?
One hour before the London open and one hour after the London open are the best times to trade the London open approach. In essence, you only have a two-hour trading window.
You'll just need to look at the chart from 7:00 a.m. to 8:00 a.m. GMT and 8:00 a.m. to 9:00 a.m. GM.
The 1 hour before the London open has as much importance as the 1 hour after the London open, according to our backtesting findings.
Most of the time, volatility begins to rise 30 minutes before the London market opens.
Actually, our preferred London trading scenario is when the market begins to move before the London market opens.
There are several ways to skin a cat, but you must rely on a proven, backtested approach; otherwise, you are simply guessing.
Our London breakout strategy layout offers an advantage, as we'll show you.
The cornerstone for profitable trading Trading against the crowd is the London daybreak technique.
After all, it is common knowledge that 95% of all traders lose money.
This figure has been around for a long time.
So, what can you do to ensure that you do not become a statistic?
Simply follow our London open breakout trading principles and join the 5% of expert traders that consistently earn money.
Take a look at the following:
What is the Forex London Breakout Strategy and How Do I Trade It?
By fading the pre-open action, we trade the the London breakout strategy.
Our backtesting shows that fading the London Open provides a high-probability trading setup.
There's a catch, though.
For the opening range breakout, you must adhere to a set of tight trading criteria.
We won't trade every day, but only when the market shows signs of agreeing with our guidelines.
Otherwise, we may save the money for a future conflict.
Here's how you can join the smart money in trading the London open.
Take a look at the following:
Rule 1: Establish the London Trading Range.
We'll utilize the range definition, which just takes into account the body of the candles and ignores the wicks.
Note that as you gain expertise in reading price movement, you may alter this trading rule.
Who knows, maybe you'll be able to spot some price movement trends that no one else has noticed around the London open.
The trading range is seen in the GBP/USD chart below:
Because the Asia trading range attracts buy and sell stops above and below the trading range, the london breakout strategy works.
Smart money may easily target the majority of purchasing and selling stops.
Keep in mind that traders want liquidity in order to execute their orders.
And smart money is constantly on the lookout for liquidity in order to fulfill its massive orders. That's why wise money has to put such stops in place.
Next:
Rule #2: The Breakout Must Happen One Hour Before the London Open
The findings of our backtesting indicated that momentum picks up 1 hour before the actual London starting session.
There are a few clever ways to profit from this surge of enthusiasm.
Let's take a look at several technical strategies for trading the pre-London open.
We don't have to estimate which way the market will break; instead, we'll let the market show us the way.
Here's when things start to get interesting.
Allow me to explain...
We'll see the biggest traded volume during the London session, so the foreign currency market should really take off in one direction or the other.
The one-sided move in the GBP/USD may be seen in our illustration.
Take a look at the FX chart below:
There were no breaks in the momentum action, which is crucial for this trade setup to operate.
Let's have a look at the second technical aspect of the London setup now.
Take a look at the following:
Rule #3: Fade the Breakout from the London Open
We hope to see the price fade the pre-open move as soon as the London session commences.
We know it was a fake breakout if the price move starts to fade.
The smart money has leveraged the pre-open move to set stops below the range, and they are now reversing the trend and buying.
We'd want to see the price return to the range at the same rate as it rose.
Allow me to explain...
To put it another way, the bullish momentum that produced the false breakout must be comparable to the negative momentum that faded the pre-open move.
After the first 5-minutes have established that the price is reversing, we enter our trade.
After you've executed this trade setup, you should notice a V-shaped price formation (or inverse V-shape).
Let's take a look at how you may cash in on your winnings immediately.
Take a look at the following:
Rule No. 4 Profit from the trend or ride it out
We may calculate our profit objective by measuring the size of the Asia trading range and projecting it from the top or bottom of our range.
However, this sort of setup can frequently lead to a trading day that lasts many days.
Allow me to demonstrate...
Take a look at the Forex chart below:
In this instance, it's a good idea to use various trading strategies so you can profit from the trend.
Please see our newest Trend Trading Strategy - The Right Side of the Market for additional information on this issue.
In this case, a trailing stop might be a superior take-profit technique.
To handle your trades, you must be willing to try out new trading approaches.
Now…
It's just as crucial to protecting the downside as it is to make money.
We'll show you how to utilize time as a stop loss in the sections below.
Isn't it intriguing?
So, without further ado, let's get down to business.
Take a look at the following:
Rule #5: Instead of a price stop, use a time stop.
To fade the forex London breakout strategy you'll need to employ unorthodox trading strategies.
In this case, we'll utilize a time stop rather than a price stop for our stop loss trading method.
I learned about the time stop idea for the first time when reading Market Wizards.
Paul Tudor Jones, a billionaire hedge fund manager and one of the best traders of our time, said:
“When I trade, I don’t just use a price stop, I also use a time stop.”
Do you want to learn how to use the time stop with the London strategy?
It's fairly straightforward...
We abandon the trade if the price does not completely reverse the pre-opening breakout in the first hour following the London opening.
That's all there is to it; no additional explanation is required.
What is the best currency pair for the London breakout strategy
If you want to be successful with the London breakout strategy, you must first determine which is the best currency pair for the London breakout strategy.
With the London breakout strategy, not all currency pairings perform the same. Some currency pairs provide stronger trading indications than others. The best currency pairs to trade the London breakout strategy are GBP crosses like GBP/USD, GBP/JPY, and EUR/GBP, as you might expect.
Final Thoughts - London breakout strategy
In conclusion, the London breakout strategy might help you boost your chances of success in the currency market. Now that we understand the technical ideas underlying the London open, make sure you only trade setups that follow all of the requirements outlined in this trading guide.
You'll have no trouble defeating the dealers at their own game if you remember these three trading principles:
Volatility
Pre-open bullish/bearish momentum should be faded.
Make use of a time stop loss.
If you're in the United States, the bad news is that the London Open takes place in the middle of the night. The good news is that you may use the same techniques that you used for the New York breakout method to profit from the New York open. In fact, some trading techniques will entail leveraging both the London and New York openings on the same day.
Thank you for taking the time to read this!
Please leave any comments below; we read all of them and will react.
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The Most Accurate Trading Signals works with any broker and any type of account, but we recommend our clients to use one of the top forex brokers listed below:
Download London Breakout Forex Strategy
We highly recommend trying the London Breakout Forex Strategy for at least a week with ICMarket demo account. Also, familiarize yourself with and understand how this system works before using it on a live account.
London Forex Rush System MT4
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