This GBPUSD breakout forex trading strategy is planned to capture the early market breakout of the GBPUSD currency pair during the European forex trading session.
And you can also apply to use it on the Forex EURGBP currency pair if you choose to.
Why GBPUSD & EURGBP?
Because these two forex currency pairs tend to be actively traded during the European forex trading session.
Here’s How It Works
The GBPUSD breakout strategy is all about getting into a trade very early on, just before the marker or price starts to establish its primary trend for the day?
Well, When you can get in early, you can get the most out of the trend move for that day.
So how do you get into a forex trade early then?
Answer: you need to know exactly what times the forex London and Frankfurt Markets opens in the mornings:
- The Frankfurt forex Market Opens at 7:AM GMT
- An hour later, the London Market begins at 8 AM GMT
This is the European forex trading session when Europe starts trading forex.
Forex Currency Pairs You Can Trade
GBPUSD and you can also trade EURGBP
What Timeframes To Trade?
You need two timeframes for this forex GBPUSD breakout strategy: the 1-hr and 5minute timeframes.
Any Other Forex Indicators Required?
You don’t need to use any forex trading indicator with this forex trading system.
GBPUSD Breakout Forex Trading Strategy Rules
- First, you need to open up the 1-hr chart of GBPUSD or EURGBP.
- Mark the chart high and low of that 1 hr chart with two parallel horizontal lines. This creates your market price tunnel as shown on this chart below:
- Then switch to a 5-minute timeframe chart and wait for a candlestick to close outside the tunnel.
- If it closes above the top line, you initiate a market order, or you can place a pending buy stop order two pips above that candlestick and wait for it to be activated. If a 5-minute candlestick closes below the bottom line, you can sell at market order or place a pending sell stop order two pips below the low of that 5-minute candlestick.
- It would be best to place your stop loss 2-10 pips outside the tunnel lines.
- Calculate your take profit(TP) based on 1:3 risk to reward ratio or use previous chart swing highs/swing lows for profit targets.
Advantages Of The Forex GBPUSD Breakout Trading Strategy
- an accessible price action breakout trading system
- If the breakout happens and the trend is true and good, you can be anywhere from 100-140 pips in profit during the day.
- You can use this as a simple set and forget forex trading strategy if you have a day job or are busy.
- You only have one or 2 (max) trades per day, which reduces over-trading. Less is more in forex trading.
Disadvantages of The Forex GBPUSD Breakout Trading Strategy
- No quick forex trading system is the holy grail, and price can cause whipsaws to take out your stop loss(SL).
- Sometimes, the tunnel distance can be very huge, which is not good because it significantly reduces your risk: reward. I suggest that if the tunnel distance in pips (difference between high and low) is more than 40 pips, do not take the trade.
Read More: Profitable Breakout EA For FREE Download