The London Breakout is a day trading strategy that uses the trading range before the London session opens.
Since London is in a different time zone than the New York Stock Exchange, the market opens several hours before the NYSE. As a result, traders will have a one-of-a-kind opportunity to initiate new positions due to this.
What is the London Breakout trading strategy?
The Tokyo session, London session, and New York session are the three primary trading time zones in the currency markets. There is a lot of trading activity in the opening hour of trade.
The overlapping of the Tokyo session’s end and the London trading session’s beginning also significantly increased trade volumes.
A trader can profit from greater market volatility by using the London breakout trading strategy. In addition, a trader may build a steady trading income in only a few hours by using this trading approach. Another pro of this trading method is that you can tailor it to your preferences.
The London breakout trading is not always effective, which is a key point to remember. You should pay attention to the news that emerges during this session and the technical features of the London strategy. The London breakout trading is a useful trading strategy with increasing volatility.
How to use the London Breakout strategy?
Traders that use the London breakout trading strategy must trade the Asian session breakout during the London trading session. Using multiple indicators or creating a trading system is a good method to achieve this.
The main idea of this trading strategy is that a trader must concentrate on the London Breakout method’s short-term price swings. You should wait for the price to break out of the range before closing outside it.
After the first breakout, you can set a pending order with a stop-loss at the nearest swing high or low.
During this session, the GBP/USD pair is undoubtedly the most traded currency pair that a trader can trade. Some cross forex pairs, such as the GBP/JPY, are also worth considering for traders.
The volatility of the GBPJPY pair is well-known. This provides the trader with several trading opportunities.
How to improve the strategy?
Waiting for a retracement is one way to improve the effectiveness of the London breakout trading approach. You must, however, wait for the retracement to occur. Retracements can occur at any point during the day.
Furthermore, because the London breakout trading technique focuses on the Asian and London sessions, trading the GBPJPY currency pair makes sense when utilizing this strategy.
At 7 a.m. GMT, the London trading session begins. As a result, a trader can enter the market between the hours of 7 and 8 a.m.
The most important thing to understand while trading the London breakout trading technique is that it isn’t merely a breakout method.
Traders should also pay attention to emerging patterns. In addition, the term breakout is used in a short-term context (the last few hours of the Asian trading session close and the opening hours of the London trading session).
Bottom line
Day traders and intra-day traders can benefit from the London Breakout trading strategy. This strategy is a simple approach to trading the currency markets. Traders try to ride the market wave when the Asian and London sessions overlap using time zones and breakouts.
