Employing a breakout Forex trading system as part of your trading strategy is an excellent way to provide a time efficient and profitable trading approach to your trading day. Breakouts are one of the most popular ways in which to build Forex profits as they offer the potential to build high returns from the market momentum that follows market breaks. They can also be used to trade specific market events at a set time of day. This provides an additional attraction as you don't need to site and study charts all day in order to identify a signal to trade.
The London Forex Open strategy looks to profit from the increased market volatility which occurs in the first few hours of trading following the opening of the London financial markets. This market session is one of the most heavily traded in the daily Forex calendar, seeing an increase in deals being brokered as traders position themselves in the market for the upcoming trading day.
Following on from the relative calm of the Asian market session, the London market is generally regarded as setting the directional trend that markets will move in the upcoming day. In addition to the increased trading volume that is seen at this time, a lot of market moving news is also released. This helps to define new trends as traders digest this news and then reposition themselves as a result of its contents.
The first few hours of the London market open are therefore a key time in the daily trading schedule. They can set the trends for the day and it is these that the London Forex trading system seeks to identify. It does this by mapping the range set in the prior Asian session. If a break of this range occurs when the London market opens the strategy looks to confirm if this is simply the results of volatility or whether a new trend is forming.
If the market breaks strongly from its prior range and all other conditions for the strategy are confirmed then the signal is given to enter the market. Strict order details are provided which specify the exact targets to set for your order. In addition risk is minimised by making use of defined stop levels. These are given to help minimise risk and to ensure that you don't get caught up in a 'false market break.' This happens when the market signals an early breakout but then subsequently reverses. This can happen when unexpected news suddenly hits the markets.
The simplicity of the system makes it not only easy to understand but also very time efficient way in which to trade. You open up your chart and look to see if a signal has been generated. If it has then you enter your order as instructed. This order will include both the recommended levels to take profit and where to place your stop loss.
If no signal is provided at the open then you can close your chart down for the day as the requirements for potentially profitable Forex breakout trading will have not been met.