Learn how to trade the London Breakout Strategies and effective ways to win smart money. We present a daily trading strategy successfully used by London traders. The London Breakout trading strategy incorporates the concept of secret trading that you can utilize in the forex market.
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Everyone has heard of breakout deals. As the term suggests, breakout trading strategies attempt to identify price movements that “break out” in a predictable range. This range can be captured through Bollinger Bands and various other technical indicators.
In fact, breakouts are one of the most popular trading strategies.
Market prices (whether for Forex currencies, futures, stocks, commodities or cryptocurrencies) are constantly changing from trend to range and vice versa.
The only way a range can transition into a trend is if the price is out of the range.
Through this trading guide, you will learn about a specific breakout called the London Open Breakout Strategy.
We will reveal trading secrets to help you implement the opening range breakout technique in your trades.
First, let me explain what the London Open strategy is.
What is the London breakout strategy
Simply put, the London Breakout Strategy 2020 is a daily trading strategy that seeks to take advantage of the trading range prior to the opening of London.
Since London is in a different time zone, the market opens a few hours before the exchange in New York. This gives traders a unique opportunity to enter new positions.
Among retail traders, this is also known as the London Dawn strategy.
Days to trade open strategies include:
- Take a long position outside the London trading range
- Took a position shorter than the London trading range
Basically, our trading strategy today tells you how to trade the London Open.
The London Breakout Strategies PDF has been around for literally decades.
Smart money used London Forex sessions to benefit from predictable breakout signals.
These days, the secret has been revealed to the public.
But retailers are still left in the dark.
Let me explain…
To trade London all day, you need to understand how securities are priced.
The truth about trading is that you need the right approach to implement your trading strategy.
So, what can you do about it?
First of all, keep reading our London Trade Guide.
Our team of industry experts will reveal the missing links to successfully trading London opening range strategies.
But first, let’s figure out how to define a London trading scope.
Let’s get started!
How to define the London trading range
Let’s look at two ways to define London trading scope.
The most basic form of establishing a London range is to use the previous trading session, i.e. the high and low of the Asian trading session.
This method takes into account the total price action since the beginning of a new trading day.
The beauty of this approach is that it helps you better manage your trades.
The London trading range is the second method used to define a range by ignoring the candle wick and focusing on the closing price.
Note * This trading technique is most effective when used with Asian currencies such as USD/JPY.
This is an unconventional method with its own great advantages.
Let me explain…
Most of the trading volume occurs inside candles. So, by ignoring the wick, we keep our focus on where the real action is taking place.
I’m sure no one told you this!
However, there are tremendous benefits that come with it.
That means you’ll avoid false breakouts and secondly, get into the market faster with the big boys.
Now that we’ve covered how to define your London trading range, let’s look at some of the reasons why the London Open is such a powerful tool.
This will give you confidence in your trading.
When self-doubt and hesitation take over your trading mind, you will fail as a trader.
Let’s fix it.
See below:
Why the London Open Breakout Strategy Works
When London opens at 8am (GMT), there tends to be a lot of early volatility.
This is the case in almost all major financial centers around the world, but more specifically London and New York are open. These two trading sessions tend to see the most forex trading volume.
For more information on Forex trading sessions, see the Forex Beginner’s Guide.
Major banks and financial institutions start their day during this period.
Everyone has their own needs.
Let me explain…
A lot of the trading volume activity comes from banks and they try to accommodate corporate customers.
So inevitably trading at the London Open or New York Open will increase volatility.
In other words, this is the main window for money transactions.
Because volatility is synonymous with more trading opportunities.
Most of the trading activity is compressed during this trading period. If you miss an entry, there’s no chance you’ll get back on trend in the market, even if the trend comes out of the London opening range breakout.
That’s why London’s forex trading strategy is so powerful.
Monitor the first hour after the start of the London trading session.
This is a good starting point if you want to market yourself with smart money.
Our team of experts did a very rigorous London breakout strategy backtest and found the perfect time window to trade Forex. Your window of opportunity is very limited, so act quickly.
Here’s how it works.
When to Trade the London Open Strategy
The ideal time to trade the London Open strategy is one hour before the actual open and one hour after the London Open. By default, you have a 2-hour trading opportunity.
It should be in front of the charts from 7am to 8am GMT and from 8am to 9pm GMT.
Based on our backtesting results, it was found to be highly relevant from 1 hour before London open to 1 hour after London open.
In most cases, the volatility starts 30 minutes before the actual London open.
In fact, our favorite London trading setup is when the market starts moving before London opens.
There are many ways to skin a cat, but you need a reliable, back-tested method. Otherwise, I’m just guessing.
As we will prove to you, our London breakout setup has an edge.
The trading basis for trading profitable London Dawn strategies is to trade with the crowd.
After all, it is a well-known fact that 95% of all traders lose money.
This statistic has been around for several years.
So what if you don’t want to fall into this statistic?
Follow the London Open breakout trading rules and become part of the 5% elite traders who consistently make money.
See below:
How to Trade the Lonon Breakout Strategy
We cover the pre-open move and trade the London breakout strategy.
Our backtesting results show that we can trade the London Open with very high odds of weakening it.
Now there’s a catch on this.
Strict trading rules must be followed for opening range breakouts.
We don’t trade every day, but we need the market to reach out and check all the rules.
Otherwise, we can keep the money to fight another day.
Here’s how to trade the London Open with Smart Money.
See below:
Rule #1 Define London Trading Range
We will use a range definition that only considers the body of the candle, excluding the wick.
Note * These trading rules may be adjusted as we get a better reading of price action.
You will be able to discover trends in price action around London that no one else could have known.
I have outlined the trading range on the GBP/USD chart below.
The London open breakout strategy works because Asian trading ranges tend to attract buy and sell stops above and below the trading range.
Large buying and selling stops make them easy targets for smart money.
Remember, traders need liquidity to fill orders.
And smart money is always looking for liquidity to fill large orders. That’s why smart money should trigger such a stop.
next:
Rule #2: The London Open must start a week before
Our backtesting results show momentum kicking in an hour earlier than the actual London opening time.
There are smart ways to trade this momentum.
Let’s take a look at the technical methods for pre-London Open trading.
We don’t have to guess which way the market will collapse, the market will reach out and show us the way.
This is interesting.
Let me explain…
During the London session we will see the most trading volume so the forex market really needs to take off in one direction.
In this example, you can note the unilateral movement of GBP/USD.
See the forex chart below:
We have not stopped our momentum activity and this is the key to our entire trade setup.
Now, I’ll outline the second technical element I’d like to see in the London setting.
See below:
Rule #3 London Open Breakout Fade
Right after the London session kicks off, we want prices to blur the pre-open movement.
You will know it was a false breakout when the price movement starts to dissipate
The smart money used a pre-open move to trigger a stop below the range and now reverse the tie and start buying.
We would like to see the price move back into this range at the same rate that it went up.
Let me explain…
Simply put, the bullish momentum used to create the false breakout should equal the bullish momentum used to fade the pre-opening move.
We enter the trade after seeing that the price is reversing in the first 5 minutes.
Once this trade setup is complete, you will see a V-shaped (or inverse V-shaped) price composition.
Now let’s look at the methods you can use to cash out your profits.
See below:
Rule #4 Take Profit or Ride the Trend
We measure the size of our trading range in Asia and can plan projects at the upper or lower end of the range to achieve our profit target.
Often, however, this type of setup can lead to trading days that may expand in the future.
Let me prove it to you…
See the forex chart below:
Now, in this case, it would be wise to use a different trading strategy so you can really profit from this trend.
For more on this topic, check out Latest Trend Trading Strategies – The Right Side of the Market.
A better profit strategy in this example would be to use a trailing stop.
You must be ready to explore different trading methods to manage your trades.
now…
The downside is just as important as the money you make.
Below we will show you how to use time as a stop loss.
Does it sound interesting?
So, let’s get straight to the problem.
See below:
Rule #5 Use Time Stops Instead of Price Stops
To combat the London breakout, you must use conventional trading methods.
In this regard, for our stop-loss trading strategy we will be using time stops instead of price stops.
The first time I heard about the time stop concept was while reading the Market Wizards book.
Billionaire hedge fund manager Paul Tudor Jones is one of the greatest traders of our time.
“When I trade, I don’t just use price stops, I use time stops.”
If you want a peek into the mindset of some of the most successful traders and hedge fund managers, read Top Trading Quotes of All Time – How to Trade.
So, you want to know how to apply the time strategy to the London strategy?
It’s very simple…
In the first hour after London opens, if price fails to fully retrace the pre-opening breakout, exit the trade.
It’s so simple that it doesn’t need any more explanation.
Now let’s look at more London breakout examples using our own trading twist.
See below:
More London Escapes
Now you might be wondering.
Is London Breakout Forex Strategies Holy Grail?
The short answer is no.
Loss is unavoidable and it’s part of the game. No matter how much you skew your trading strategy, losses are a cost to your business.
We will highlight a trade example, and even if everything lines up perfectly, you may find that at some point the trade setup will not work.
First, set the London trading range and wait for the pre-open breakout.
See EUR/GBP trading example below.
The London pre-open breakout takes place 15 minutes before the open, which is consistent with London’s pre-dawn strategy rules.
But what happens next is the key.
The London breakout trade signal was triggered but the trade moved slightly towards us after already an hour into the London session. So we close the trade with a small loss.
Our London Breakout rules are designed to minimize our risk when we fall into enemy hands.
continue…
You will enjoy the London Breakout example next time.
On the USD/JPY chart below, everything is to buy the pre-London breakout.
The breakout occurs before London opens and further moves begin to dissipate at the same rate as the down rate.
Now, we can see that the USD/JPY pair went straight up after we entered.
There is one more element to this London breakout trade that added an extra confluence for the signals.
As you might have guessed, we are talking about a general uptrend.
Now, with this example, I’ve shown you that you can stack the odds in your favor when bringing your own into the mix.
continue…
Let’s take a look at which forex currency pairs to trade using the London Breakout Strategy.
See below:
Ideal currency pairs for your London breakout strategy
If you really want to kill with the London breakout trading strategy, you need to know which currency pairs to trade.
Not all currency pairs perform identically to London breakout strategies. Some currency pairs tend to exhibit better trading signals than others. The best currency pairs to trade the London Breakout System on are GBP crosses such as GBP/USD, GBP/JPY and EUR/GBP.
Other currency pairs to trade with the London Strategy are the major EUR/USD, USD/JPY and AUD/USD.
GBP/USD has the highest potential gains due to its high liquidity as major banking and news activity during business hours in London gives traders a lot of volatility.
Final Words – London Breakout Trading Strategy
In summary, the London Breakout Strategy can increase your odds of success in the forex market. Now that we know the technical concept of the London open, just take the settings that fit all the rules disclosed throughout this trading guide.
If you keep these 3 trade tenets in mind, the dealer will have no problem beating in his game.
- Volatile
- Pre-release bullish/bearish momentum eases
- Use time stop loss
The bad news if you’re in the US is that it’s midnight when London opens. But the good news is that you can take advantage of the New York Open using the same rules that apply to the New York breakout strategy. In fact, some trading strategies involve using the London open and New York open on the very same day.
