(Newswire.net — January 24, 2020) — The London Daybreak is a Forex strategy designed to drive price after the Asian session. The trading system during its existence has grown in many variations, but its essence has remained the same. Let’s analyze in detail several ways of trading on the Forex strategy in the London session.
Preparing the currency pair chart for trading
Before the start of trade, it is necessary to set two indicators on the currency pair chart. The first one is a normal moving average with a period of 360 (EMA 360). With its help, we will determine the direction of trade and the main trend.
The second indicator is called i-Sessions. You can download it by clicking on the link. With its help you can see the boundaries of the Asian session, which the program will paint in a certain color. Since we are not interested in other sessions, you can disable their display in the indicator settings by simply selecting the None color type opposite the European and American sessions in the settings section.
For indicators to be displayed on the work chart of a currency pair, you need to open the MQL 4 folder, which is located in the root directory of the broker. Then copy the i-Sessions file to the subfolder Indicators. After restarting the MT5 trading platform, the indicator will appear in the list. The moving average is in the preset list of the terminal.
It is recommended to use popular currency pairs – EUR/USD or GBP/USD for work on Forex strategy of London session. The timeframe is best to take either M15 or M30, although it does not play a special role.
The rules of the London daybreak system – Forex strategies to break through the corridor
Before starting trading on the “London daybreak strategy” you should measure the size of the Asian session range from minimum to maximum. If it exceeds the number of 60 points, it is better to postpone trading on that day. It is believed that the pair has already passed its main movement for today, and the subsequent impulse will not have the necessary strength to achieve take profit. If this number is less than 60 points, you can safely enter into trading.
It is immediately necessary to see which trend dominates the market at the moment. For this we will need EMA 360. If the price chart at the time of closing of the Asian session is below average, we open deals only for sale. We are going to buy when the price is above the moving average.
After determining the direction of opening the order we set the pending order 5 points below the lower bound of the corridor for selling (if the price is under EMA) and 5 points above the upper bound of the range for buying. Behind the opposite border of the range we need to set a stop-loss. The filter should be used the same – 5 points.
As for Take Profit, there are two options of its setting. The first one is a simple mathematical calculation of the optimal profit size. It is possible to close a deal when the profit exceeds the stop-loss size by 1.5 times. This approach is not always justified. You can use strong support and resistance levels located nearby. So you will determine the moment when the deal has already exhausted itself, much more precisely.
Another variation of the trading strategy London Daybreak
In another version of the trading system London daybreak the authors propose to move away from the Asian session and use the period from 9 a.m. to 6 p.m. as a starting point for calculating the entrance place. To visually highlight this period on the chart, you can simply change the time of the Asian session to the period from 9.00 to 18.00, leaving the rest of the sessions without highlighting the color.
The principle of opening deals is slightly different from the previous one. Pending orders are placed at a distance of half the range size in points for the period from 9 to 18 hours on both sides of the border. When opening one of the deals the second one should be deleted.
Take Profit is equal to the corridor width. Pending orders are placed after 6 p.m. and at 9 a.m. they are deleted if no deals have been opened. If trades have been opened and have not been closed by Take Profit or Stop Loss at 9 a.m. the next day, they should be closed, fixing any result regardless of whether it will be a profit or a loss. Stop Loss is equal to half of the range width in which the currency pair was traded between 9 a.m. and 6 p.m. plus 5 points as a filter. On the example below you can see an example of how a Forex strategy from the London session works.
At a first glance at this approach, it may seem that too large filters have been chosen to enter the market. As statistics show, there are often situations when the price makes a false breakthrough (impulse) in one of the sides, and then turns around and continues moving in the opposite direction. To avoid such situations, the author has empirically selected the optimal distance from the range boundaries, at which the trading system gives the largest number of profitable deals.
In the first case, trading on the system implies rare entrances and trading before getting the result – positive or negative. In the modified version, the orders are opened more often, trading is carried out almost every day. In the question of what way to choose, stick to the statistical data about the profitability of the trading system, having previously tested it on the history. Both options deserve traders’ attention. Remember that the profitability of trading depends very much on the online broker you choose!