The London Breakout Strategy is a popular forex trading technique that aims to
profit from the price movements that occur at the start of the London trading
session. While “50+ pips daily” is an ambitious and not guaranteed target, this
strategy focuses on capturing significant price moves with relatively simple rules.
This article outlines the London Breakout Strategy and provides guidance for
implementation.
Understanding the London Session
The London session is one of the most active and volatile trading periods in the
forex market. It overlaps with both the Asian and New York sessions, leading to
increased trading volume and price fluctuations.
The London Breakout Strategy
This strategy capitalizes on the volatility at the start of the London session,
looking for breakouts from a defined trading range established during the Asian
session.
1. Timeframe and Currency Pairs
- Timeframe: Use the 15-minute or 30-minute chart.
-
Currency Pairs: Focus on major currency pairs like EUR/USD, GBP/USD,
and EUR/GBP, which tend to be more liquid.
2. Asian Session Range
Identify the high and low prices reached during the Asian trading session (typically
from 00:00 to 08:00 GMT). This range acts as a consolidation period.
3. Entry Rules
-
Long Entry: Enter a long (buy) position when the price breaks above
the Asian session high. -
Short Entry: Enter a short (sell) position when the price breaks
below the Asian session low.
4. Time Window
Typically, you’ll take trades within the first few hours of the London session
open (e.g., 08:00 to 10:00 GMT). After this time, the initial breakout momentum
may subside.
5. Take Profit and Stop Loss
-
Take Profit: Set your take-profit target at a predetermined
distance from your entry price. A common approach is to target 1-2 times your risk. -
Stop Loss: Place your stop-loss order a few pips above the Asian
session high for short trades and a few pips below the Asian session low for long
trades. This limits your potential loss.
Example
-
The EUR/USD pair is consolidating within a 20-pip range during the Asian
session. - At 08:15 GMT, the price breaks above the Asian session high.
- You enter a long position.
- You set a stop loss 5 pips below the Asian session high.
- You set a take profit 10 pips above your entry price (1:2 risk-to-reward).
Important Considerations
-
Volatility: The London session can be volatile, so proper risk
management is crucial. -
Fakeouts: Price can sometimes break the range and then reverse.
Use stop-loss orders to protect yourself. -
News Events: Be aware of high-impact news releases that can cause
sudden price spikes. -
Spreads: Trade during periods of tight spreads to minimize trading
costs. -
Backtesting: Test this strategy on historical data to understand its
performance.
Disclaimer
Forex trading involves significant risk, and achieving consistent daily pip targets
is not guaranteed. This strategy is for educational purposes only and not financial
advice. Always conduct thorough research and consider consulting with a financial
advisor before trading forex.
Conclusion
The London Breakout Strategy can be a relatively simple and effective way to
capitalize on the volatility of the London session. However, it’s crucial to
understand the risks, manage your capital wisely, and practice diligently.
Remember that forex trading involves inherent uncertainty, and no strategy can
guarantee profits.
Related Keywords
London Breakout Strategy, forex trading strategy, forex breakout, forex swing
trading, forex trading system, forex trading for beginners, forex trading tips,
forex trading indicators, forex trading signals, forex day trading.
Frequently Asked Questions (FAQ)
1. What is the London Breakout Strategy?
The London Breakout Strategy is a forex trading technique that aims to
profit from price movements at the start of the London trading session.
2. Why is the London session important for this strategy?
The London session is highly active and volatile, offering potential for
significant price moves.
3. What currency pairs are best for this strategy?
Major currency pairs like EUR/USD, GBP/USD, and EUR/GBP are preferred due to
their high liquidity.
4. What timeframe should I use for this strategy?
Use the 15-minute or 30-minute chart for this strategy.
5. What is the Asian session range?
The Asian session range is the high and low prices reached during the Asian
trading session, typically from 00:00 to 08:00 GMT.
6. When do I enter a long position?
Enter a long position when the price breaks above the Asian session high.
7. When do I enter a short position?
Enter a short position when the price breaks below the Asian session low.
8. What is the typical time window for this strategy?
Trades are typically taken within the first few hours of the London session
open (e.g., 08:00 to 10:00 GMT).
9. Where should I place my stop loss and take profit?
Place your stop loss a few pips above the Asian session high for short
trades and a few pips below the Asian session low for long trades. Set your
take profit at a predetermined distance, often aiming for 1-2 times your risk.
10. Are daily pip targets guaranteed with this strategy?
No, achieving consistent daily pip targets is not guaranteed in forex trading.
This strategy aims to increase your chances of success, but losses are
possible.
