As the name says, the London breakout forex trading strategy has designed to trade the London forex trading market session during the first 3 hours of the London Market opening.
The Importance Of The London Forex Market Session
The Forex London trading market session is the biggest forex market mover daily,
This means that much of the forex daily trading volume happens during the London trading session. The volume of trades and the good amount of money that moves during the first few hours of the forex London trading session are HUGE!
This can create exciting opportunities and strong trends from the start of the London market opening.
This also means that whatever the trend direction that happens during the first few hours of the London market opening usually determines the trend for the day.
Currency Pairs: Only trade GBPUSD.
Timeframes: You need only the 1-hour timeframe.
Forex Indicators: You don’t need any other forex indicator for this simple trading system.
London Breakout Forex Trading Strategy Trading Rules
- Identify the last 3 one hour chart candlesticks of the Asian forex trading session.
- Determine the highest high of these three candlesticks and also the lowest low.
- Draw two parallel lines, one of the highest high point and one for the lowest low point of these three candlesticks. This forms your breakout “tunnel.”
- Then place two pending orders simultaneously: a sell stop pending order two pips below the low and a buy stop pending order two pips above the high and wait for the price to activate one of these pending limit orders.
- When one market order is activated, cancel the other limit pending order.
- Place your stop loss(SL) 5-10 pips outside of the “tunnel.”
- For take profit(TP), use previous chart swing highs or calculate it based on risk: reward(R:R) of 1:3.
Advantages of The Simple London Breakout Forex Trading Strategy
- This is a simple price action trading system and a straightforward trading rule anyone can understand and follow.
- Only one trade a day Stops you from over-trading.
Disadvantages of The Simple London Breakout Forex Trading Strategy
- There will be times when the chart tunnel distance will be quite large, most likely due to price spikes in the last few hours of the Asian trading session. If the tunnel distance is more than 40 pips, best not to trade.
- If you are a trader that doesn’t like only trading one trade a day, this forex trading system is not for you.
Read More: 20 Pips A Day Forex Trading Strategy