The London Breakout is a popular forex trading strategy that involves identifying a range-bound market during the Asian session and then entering a trade when price breaks out of that range during the London session. This strategy is popular among traders because it offers a high probability of success and can be used on a variety of currency pairs.
To set up the London Breakout, you will need to follow these steps:
Step 1: Identify the Asian session range
The first step in setting up the London Breakout is to identify the range of the market during the Asian session. This can be done by drawing horizontal lines on the chart to mark the high and low of the Asian session. These lines will act as support and resistance levels for the London session.
Step 2: Identify the London session open
The next step is to identify the open of the London session. This is typically at 8:00 a.m. GMT. You can use a forex calendar to determine the exact time of the London open in your time zone.
Step 3: Wait for the London session breakout
Once the London session has opened, you will need to wait for price to break out of the Asian session range. This can be done by waiting for price to close above the Asian session high or below the Asian session low.
Step 4: Enter the trade
Once price has broken out of the Asian session range, you can enter the trade in the direction of the breakout. If price breaks above the Asian session high, you can enter a long trade. If price breaks below the Asian session low, you can enter a short trade.
Step 5: Set your stop loss and take profit levels
To manage your risk, you will need to set your stop loss and take profit levels. Your stop loss should be placed below the Asian session low for long trades and above the Asian session high for short trades. Your take profit should be set at a distance equal to the size of the Asian session range.
Step 6: Monitor the trade
Once you have entered the trade, you will need to monitor it closely. If price moves against you, you may need to adjust your stop loss to protect your capital. If price moves in your favor, you may want to consider trailing your stop loss to lock in profits.
In conclusion, the London Breakout is a popular forex trading strategy that can offer high probability trades. To set up the London Breakout, you will need to identify the Asian session range, wait for the London session breakout, enter the trade in the direction of the breakout, set your stop loss and take profit levels, and monitor the trade closely. With practice, you can become proficient at using the London Breakout to profit from the forex market.
