Trading activity is traditionally divided into several sessions in the foreign exchange market. That’s related to real-money accounts which are intended to exchange currencies from import-export operations. The trading volume is not smooth throughout the day and there are spikes of activity. Most of the speculators take advantage of that, especially in London open as the Asian trading session is comparatively quiet, sharing slow-moving action. With the trading volume coming back to the forex market, volatility also grows, and currency pairs start moving. Volatility is the best friend of any forex speculator as it promises more profits. Based on that, the London Breakout Forex Strategy was developed.
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The main technique is based on forex breakout strategy, which suggests that if GBP/USD was trading in a tight sideways range during the Asian trading session, and breached a certain resistance or support level during the London open, then the price action would continue moving in the same direction throughout the day. Therefore, two horizontal lines placed at high and low price levels, which were printed in Tokyo, should determine the threshold of entering the market. For instance, if a high price of GBP/USD was 1.2250 in Tokyo, and the pair charted a peak of 1.2252 in London open, then the further price action should be bullish, and it’s worth opening long positions. At the same time, if a low rate was noticed at the level of 1.2238, and the Pound moved lower during the appropriate hours, then short positions would be reasonable.
The London Daybreak Strategy review says that the most efficient performance is achieved when trading positions are closed when the European comes to an end. However, the New York open comes when most of the London exchanges are still open. What’s more, fundamental events traditionally happen before the New York open, and most of them bring significant shifts to current investors’ and traders’ sentiment. Therefore, higher volatility could influence the price action, and some profitable positions might reverse and get back into negative territory or even trigger stop-loss orders. In order to avoid that, forex traders have two options. First, it’s highly recommended to close all trading positions for GBP/USD before North America wakes up. This is an option for beginners who do not feel confident in trading fundamentals. Second, traders could adjust their trading positions depending on the economic reports coming out at around 08:30 AM New York Time (01:30 PM London Time). But there must be a certain skill of trading fundamentals to know how to do that in the right way.
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