General description of London Breakout trading strategy
So, the London Breakout Forex trading strategy has been tested by time and thousands of traders. There are many modifications of this system and now we will describe one of them.
This Forex Breakout system for manual trading uses several technical indicators that help determine the “box” of morning volatility, the breakdown of which must be traded, determine the direction of the trend and the intensity of this trend.
The template of this Breakout Trading Strategy on the MT4 platform looks like this:
So, this London Breakout trading system works as follows (we will describe the algorithm of its operation step by step):
- Using a special indicator, the width of the volatility “box” (zone) that formed in the morning (before the opening of the London session) is determined.
- The trend indicator shows in which direction the price is moving. This direction shows in which direction you need to place a pending Buy Stop order (if the trend is growing) or Sell Stop (if the trend is downward).
- You also need to pay attention to the volatility indicator in a separate window; it also indicates the direction of the trend and its intensity.
How to trade?
So, after you have copied the London Breakout Strategy files from our archive (which you should receive after purchase) to the root directory of the MetaTrader 4 platform, restart the platform.
Next, open any quote chart of any currency pair, for example GBPUSD, and apply the trading system template "Trend Plus Forex System" to this quote chart.
Also, you can use other currency pairs. Important - This Forex Breakout System is best used on the M15 timeframe.
After applying the Breakout Trading Strategy template, all technical indicators will be automatically applied to the quote chart, and the corresponding graphical coloring of the quote chart will appear.
Open your MT4 trading platform immediately after the London session begins. According to European time it is at 9:00 AM. At this time, the morning volatility box will be formed, this box looks like this:
- If quotes are above the moving average, then this is a growing trend. You can only trade on Buy.
- If the quotes are below the moving average, then this is a downward trend and you can only trade on Sell.
Trading should be carried out as follows (Using the example of a growing trend - only BUY deals):
- Place a Buy Stop pending order at the upper level of the volatility box.
- Set Stop Loss on the opposite side of the box
- Set a Take Profit whose size is equal to the size of the volatility box.
If the trend is downward, then we trade only on SELL. In this case, all the rules described above will work in a mirror order.
We advise you to pay attention to the indicators, which are located in a separate window (at the bottom of the quote chart). They should show an active trend in the direction of your trade (the longer the histogram bars of these indicators, the stronger the trend).
As you understand, long red bars show an actively falling trend and long green bars show an actively growing trend.
If the histogram columns are below their signal levels, then it is better to refuse trading because the trend is weak (flat in the market), which means the quotes will rotate around the trend line and most likely touch your Stop Loss order.
If you see a growing trend on the quote chart and the histogram is colored red, then it is better to refuse trading. Let us remind you that this is a Breakout Trading Strategy, so the strength and direction of the trend are of great importance for trading. So there is no need to neglect the indicators for this London Breakout Strategy.