London Open Forex Breakout Strategy

Introduction to the London Open Forex Breakout Strategy

This strategy is yet another breakout strategy which is meant to catch the early big moves of the London open. You may call this another version of the London Open breakout strategy, but this time we use different indicators and a different technique. It is always good to find different ways of achieving the same results: some will find one method easier than the other; others will find the other method simpler and perhaps more enjoyable to use.

Another difference here is that the trade can be performed on the 15-minute and 30-minute charts.

Indicators Used:

The indicators to be used for this strategy are as follows:

  1. Breakout Box 4 London Open indicator
  2. Buy Zone Fib
  3. Sell zone Fib
  4. FX Fisher mod indicator (set to period 10; signal True)
  5. FX Fisher mod indicator (set to period 25; signal True)

The widest side of the box (time range) is from 2am GMT to 7.45am GMT. The London open is at 8am GMT.

The Strategy

The strategy revolves around the box and the two zone Fib lines, with conformation provided by the Fisher indicators. We want a situation where the price action will break out of the second box with the green border, close either above the buy zone Fib line with green coloured FX-Fisher indicators, or close below the sell zone Fib line with red coloured FX-Fisher indicators. We explain each trade below for clarity.

Long Trade

The Long trade setup occurs under the following conditions:

  1. Price must first break out above the box.
  2. The price must be located above the buy zone Fib while the price action is still within the boxed area.
  3. The long trade is initiated at the open of the next candle.

 Box_london1

In this snapshot, we see that the price action has not only broken out of the upper boundary of the box, but actually just closed above the buy zone Fib. With confirmation provided by the FX-Fisher indicators (green colour), the next step is to buy on the open of the next candle.

Stop Loss

This is more or less a scalping strategy because of the short duration of the time frame. The stop loss is set at around 20 pips.

Take Profit

The Take Profit is set to twice the stop loss, which is 40 pips. However, it is advisable to take half the profits at 20 pips (i.e. close half the position) and then move the stop loss to breakeven point for the remainder of the trade.

Short Trade
The Short trade setup is the reverse play. This occurs when:

  1. Price breaks below the lower border of the box.
  2. At the same time, the price action is located below the sell zone Fib line which is red in colour from the chart shown below.
  3. The two FX-Fisher indicators are red in colour.

The short trade is initiated on the asset on the open price of the next candle.

We demonstrate this trade setup in the snapshot below:

Box_london2

In this snapshot taken we see the price action breaking below the lower border of the box, located below the sell (red) zone Fib, and giving the trader the opportunity to sell because the FX-Fisher indicators are also red in colour.

Stop Loss

The stop loss is set to around 20 pips since this is a short term trade taken from the 15-minute or 30-minute time frame.

Take Profit

The Take Profit level is set to twice the stop loss level. When the price has hit about 20 pips, close half the position and move the stop loss to the breakeven point (or point where trade was entered).

Conclusion

This strategy performs very well in a trending market, and less so in a range-bound market. Therefore, trades made on currency pairs that tend to trend, or on assets listed on certain forex platforms such as the stock indices or gold, will do very well with this strategy. However, take time to trade currencies that are active in this zone. What do we mean? While you may trade a cross of AUDJPY, this is not the zone to trade the Canadian Dollar. Get the drift?

The extremely short term nature of this trade means that the trader must observe this trade continuously from start to end.

This is simply another way to trade the London open breakout, but this time using customized indicators. If you need these indicators, simply send an email to the admin of the site and they will be forwarded to you.

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