London Open Breakout Strategy

London Breakout Strategy

The London Open Breakout strategy is similar to the New York Open Breakout strategy in terms of strategy and implementation. The only difference is that the London Open Breakout strategy is traded within the first two hours of the opening of the London forex time zone. This will affect some of the indicator settings that will be used. However, the basic principles of the strategy as well as the GMT offset settings are the same.

The strategy is meant to catch any big moves that occur between 6am and 8am GMT. The principle behind this strategy is to trade in the direction of where the market players push the currency pair once the overlap period between the Asian and London time zones occur. There are fewer interfering news trades during this period, so movement of the market is a bit more predictable here.

Indicators

The original strategy as described is uses two custom indicators which are freely available for download online.

  1. ant-GUBreakout. The original version is v 0.4.1. As at 2014, version 0.4.2, optimized for use on the new MT4 Build 600 platforms has been released. A Google search will reveal the source where you can download this indicator.
  2. iParamonWorkTime indicator.
  3. The MACD indicator which is coloured is also used for confirmation of trade entry.

Currencies

Since this strategy is to be traded in the first two hours of the London market session when it overlaps with the Asian session, only currency pairs which are actively traded during this session should be used. These include the Asian currencies, European currencies as well as the USD.

The Strategy

This strategy is traded on the 15 minute chart. Before starting the trade, you must adjust the GMT offset for the indicator. That is, determine by how many hours your platform’s time differs from the Greenwich Mean Time (on which the strategy is based). Check the Market Watch window for your platform time, and determine by how many hours this differs from your local time. Use the World Clock on Google to determine by how many hours your local time differs from GMT. Add the difference to the difference between the platform time and local time, to get the GMT offset.

Apply the iParamonWorkTime indicator. Open the indicator and adjust the time setting to 7am and 11am. Also adjust the GMT offset for the antGUBreakout indicator according to the number of hours your platform time differs from GMT.

1) Long Trade

For the long trade, we wait for the price action to break above the upper trend line drawn by the iParamonWorkTime indicator. Once the price action candle has moved above and closed above the trend line, set a Buy Limit order with the price at the upper trend line used as the entry price.

London_long

The chart above shows the setup for the long trade. The price broke above the upper trend line, within the vertical boundaries of the price action as drawn by the antGUBreakout. The long entry is performed using a Buy Limit order. Notice that at this point as well, the MACD indicator is painted blue.

Stop Loss

The stop loss is set below the upper trend line. In this example, the stop loss is placed below the low of candles within the painted region.

Take Profit

The Take Profit is dynamic. The trade is left open until the MACD indicator turns red. This is the signal to exit the trade. Please note that because the trades are implemented on the 15-minute time frame, the targets for profit should be kept at between 30 pips and 50 pips.

2) Short Trade

For the short trade, we wait for the price action to break below the lower trend line drawn by the iParamonWorkTime indicator. Once the price action candle has closed below the lower trend line, set a Sell Limit order using the price at the lower trend line used as the entry price.

London_short

The chart above shows the setup for the short trade for the GBPJPY currency pair. The price broke below the lower trend line at a little distance from the painted area. The short entry is performed using a Sell Limit order. Notice that at this point as well, the MACD indicator is painted red.

Stop Loss
The stop loss is set above the lower trend line.

Take Profit

The Take Profit is dynamic. The trade is left open until the MACD indicator turns blue. This is the signal to exit the trade. Please note that because the trades are implemented on the 15-minute time frame, the targets for profit should be kept at between 30 pips and 50 pips.

Always make sure that the appropriate time and GMT offset settings are correctly adjusted when attaching both custom indicators to the chart.

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