Looking for a great Breakout trading strategy? You can stop right now - this London Breakout Forex Strategy is an easy way to lock in profits from sudden spikes in trading volume!
AtoZForex – Today we will be discussing the London Breakout Forex Strategy - one of the most useful and practical breakout trading strategies. This strategy is specifically designed to benefit from a sudden spike of trading volume near the London Open session.
London Breakout Forex Strategy basics
The London Session has been created in order to take advantage of the steep spikes in the trading volume near the London Open Session. In order to properly utilize this strategy in your favor, you will need the basic skill to draw horizontal lines and a couple of hours of free time during the London session.
As we know, before the London session, the trading is occurring in the Asian session. Normally, the European session has the highest volume of trading activity in terms of the liquidity, price action, and volatility. Thus, we are looking to take advantage of the range bound market that takes place during the Asian session. As the trading volume will suddenly rise, we want to get involved in the trade during this period.
In order to catch the right moves during the London Open, you will not need any specific indicators. However, one thing is strongly recommended – use one-hour Forex chart. Moreover, you will need to use proper risk management techniques. As for the currency pairs, you can focus your attention on GBPUSD, EURUSD, and NZDUSD.
How to trade with London Breakout Forex Strategy?
As we are coming to the London session in a range, we already have an entry point due to that range. In order to trade the London Breakout Forex Strategy, you need to follow the next steps:
- First, you need to draw a support and resistance lines around the last 3 candlesticks that have appeared in the Asian session for the pair you are trading (for example, GBPUSD);
- Then, place a buy stop order approximately 2-5 pips above the resistance zone;
- Afterward, place a sell stop order approximately 2-5 pips below the support zone;
- Once the order is active, cancel the other pending order;
- Finally, place your stop loss in the place of the previous order.
London breakout GBPUSD chart on 19th May, 2017 H1
Pros and Cons of London Forex Breakout Strategy
- You don't need indicators
- Easy to understand and implement
- A price action trading strategy
- Potential to get caught up in the bear or bull trap
- Might be tricky to trade with this London Breakout Strategy during Monday or Friday. These days tend to bring some odd price action during the market close/open hours.
Think we missed something? Let us know in the comment section below.