To understand any strategy we have to understand what the forex market is and how it works. Forex market or foreign exchange market is a global market for traders to exchange national currency. Any trader with a license can trade in forex from anywhere in the world.
Now, the London breakout strategy is a day trading strategy that takes advantage of the London opening session before it opens. This has been effective for many traders and if you understand the basics this will be good for you too. As you know the forex market is categorized into three main time zones which are the Tokyo session, London session, and New York session. All of them open from nine in the morning to five in the evening but because of the difference in time zone all three open at different times and some overlap others.
The London session is considered as the strong volatility as London is considered as the biggest capital market of the world and the beginning of this London session is also the end of the Asia session which is the Tokyo session. In the forex market when the London session opens you will see a certain spike in its moment. The first thing you can do is learn about it as much as you can read the book, read articles and understand the mechanics of how the forex market works and how different sessions works only then you will be any near to understanding any strategy but without no strategy will be useful and you will end up losing money by investing your hard-earned money.
The London breakout strategy is that you focus on the short-term aspects of the price moments that come with this kind of trading. Above all the strategies fade-out strategy is proven to be effective in earning for a long period with consistency. Remember this will fail initially but it will work once you get hold of the technique.
What we hear is we pull out the chart and with the help of this we will build out a strategy if you don’t know how to read the chart make sure you know the basics. So Before the London open, you draw a support and resistance line around thud the last candlesticks that formed in the Asian session usually the last hour you don’t need two or four hours of candlestick activity you just need a few ranges of the candle before the London open. Then what you do is wait for the price to break that range either below or above it. When then it happens you wait for the price to break on the other side of the range. So you don’t need to trade the breakout; you fade if you want to see trapped traders attempting to catch that breakout. If the price returns and breaks it on the side you can search for crates in the opposite direction of the London breaks out. Your aim should be of small profit. The most ideal currency pairs to trade the London breakout system are JPP USD and the JPB JPY. Well what you choose are not just limited to these, these are just suggestions you can go for other major currency pairs.
The best thing for you is you should pick up two currency pairs and see how they behave. Remember your attention and your prudence will help you to earn money in this market which is volatile and far from perfect because of the breakdown and role of big players in the market. So this was a short explanation or guide to the London breakout strategy.