The London Breakout trading strategy is a widely used technique that exploits price volatility at the opening of the London trading session, which begins at 8:00 am GMT. This approach can be applied to various financial markets, including forex, stocks, indices, and commodities, making it highly versatile.
At its core, the London Breakout trading strategy involves recognizing the price range established during the Asia-Pacific trading session and then trading a breakout of this range during the London trading session. The Asia-Pacific trading session is characterized by low volatility and narrow price ranges, which traders can use to prepare for the London session.
Identifying the London Breakout Entry
To start, traders must identify the highest and lowest points of the price range during the Asia-Pacific trading session, which can be done using technical analysis tools like support and resistance levels, trend lines, and moving averages. Afterward, traders can set up their trades for the London session.
During the London session, traders should look for a breakout of the Asia-Pacific range. If the price exceeds the range, traders can purchase the currency pair or financial instrument in question, but if the price falls below the range, traders can sell the currency pair or financial instrument.
It’s worth noting that the London Breakout trading strategy is momentum-based, necessitating quick reactions to price movements. To protect their trades in the event of abrupt price reversals, traders should use stop-loss orders.
In summary, the London Breakout trading strategy is a popular approach that involves identifying the price range established during the Asia-Pacific trading session and then trading a breakout of this range during the London trading session. Traders must react promptly to price movements and use stop-loss orders to safeguard their trades.
In this episode, we build a London Breakout, although you can modify this model to breakout of other sessions and times very easily.
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