London Open Forex Breakout Strategy For MT4
Table Of Contents:
- London Open Forex Breakout Strategy For MT4
- Key indicators used in this system
- Functions of the indicators
- The long trade setup sequence
- The short trade setup sequence
- London Open Forex Breakout Strategy For MT4 – Useful advice
- London Open Forex Breakout Strategy For MT4 – Conclusion
Please note: This strategy was publicly published in the trading community and is free to use. We do NOT make an attempt to decide if this strategy is profitable or not, because we know that the major factors regarding trading results are the skills/experience of the trader who executes the strategy. Therefore, we are mainly explaining the components and rules of the strategy. If applicable, we are highlighting advantages, disadvantages and possible improvements of the strategy.
The London Open Forex Breakout Strategy For MT4 is based on a price range that develops between 2 GMT and 7:45 GMT. This time span is exactly the time before the London session begins. Trade entries are triggered when a breakout above or below the price range occurs during the London session.
According to the developer, this strategy works best on EURUSD, GBPUSD, and AUDUSD on M30 and H1. But once you become comfortable with the London Open Forex Breakout Strategy For MT4 you should be able to take the trades in pairs related to the EURO or GBP. Now let’s have a look at the key indicators used in this system.
Key indicators used in this system
- 55 modified moving average
- Breakout Box 4 London
- FX Fish Mod
Chart setup with the London Open Forex Breakout Strategy For MT4
Functions of the indicators
The indicators of the London Open Forex Breakout Strategy For MT4 are not like your regular tools. You have to learn its functions properly or else taking the correct reading while analyzing the market data can be a very tough task. That’s why we are going to briefly discuss the analytical process of each indicator so that you may take the accurate reading even at extreme stress.
55 modified moving average
In the London Open Forex Breakout Strategy For MT4, we are going to use two modified settings of the 55 moving average. The blue color MA is going to act as the fast-moving average and the red color MA is going to act as the slow-moving average.
Identify the direction of the trend
These MAs are used to identify the direction of the trend. If the slope is negative, look for the short trade setup. On the contrary, if the slope is positive, you should be looking for the long trade setup. Note that these MAs are also going to act as the dynamic support and resistance level.
Breakout Box 4 London
The breakout Box 4 London is often considered as the prime indicator for the London Open Forex Breakout Strategy For MT4. We will be taking advantage of the consolidated price movement inside the Breakout Box and take the trades right after the breakout.
Analyzing the breakout box functions
Note that all boxes are not considered as a suitable trading point. The boxes which are formed near the support or the resistance level should be considered as the trade triggering zone. In some cases, you might find these boxes near the 55 modified moving average.
FX Fish Mod
The FX Fish Mod also uses two variations. But we don’t have to change any settings since the indicators will open in two different windows once you load the template for this London Open Forex Breakout Strategy For MT4.
For the bullish confirmation signal, we should be looking for the green bars on the positive side of the indicator panel. On the contrary, in order to consider a sell signal as valid, we should be looking for the red bars below the reference line zero.
The long trade setup sequence
By now, you have a fair knowledge about the use of each indicator associated with the London Open Forex Breakout Strategy For MT4. But to take the trades, you need to follow some sequential steps. To ease the overall trading process, we are going to highlight the key conditions which you need to check to open the long order.
Conditions to execute the long trade
- Select a currency pair that is associated with the EURO or GBP and analyze the data in the London trading session.
- The slope of the blue and red moving average should be positive which indicates the bulls are already controlling the market.
- Wait for the consolidation in the price. The consolidation zone should be confirmed by the use of the rectangular or square box formed by the indicator.
- The position of the box should be near the critical support level. If the box is too far away from the support zone, ignore the ranging phase.
- Wait for the bullish breakout of the price. As the price breaks above the top border of the box, you may expect a strong bullish rally.
- At the FX Fish mod indicator, you should see green bars forming on the positive side of the reference line.
- After checking all these conditions, you may take the long trade with managed risk.
Execution of the long trade
Stop loss
The stop loss can be placed in two ways. You may set the SL below the low of the bullish candlestick which caused the bullish break. On the contrary, you may use a conservative method in which the stop loss will be placed below the bottom border of the box.
Take profit
The take profit should be set based on the risk to reward ratio. The minimum risk to reward ratio for the trade setup is 1:2. You may also use the nearest resistance level to set the take profit. But try to close the trade during the London trading session.
The short trade setup sequence
In this segment, we will learn to use the London Open Forex Breakout Strategy For MT4 in a bit more advanced way. By using this technique, we should be able to take the trades with a tight stop and the risk to reward ratio will be better than 1:3. Now let’s check the short trade setup conditions.
Conditions to execute the short trade
- Using the horizontal or the trend line tools, draw the important support and resistance level in your trading asset.
- Check the slope of the 55 periods modified moving average and make sure the price is trading below it. It signifies the overall trend is down.
- Wait for the bullish correction in price. As the correction ends, you should see a ranging phase in the market. Note that, during the ranging phase, you might experience some false spikes in the price.
- The ranging phase in the market will be confirmed once you spot the London box in the chart.
- Wait for the bearish breakout of the box as it will signify the price is most likely to fall to the nearest support level.
- Check the bar color in the FX Fish Mod indicator. It should have red bars on the negative side of the reference line.
- Check the economic calendar and make sure there is no high-impact news scheduled in the upcoming 1 hour. If so, you should be ignoring the trade signals even though it might look like a golden signal.
- If all these conditions are met, you may open the short trades with less than 2% risk.
Execution of the short trade
Stop loss
The stop loss should be placed right above the broken support level as it will turn into strong resistance. You may also use the bearish price action confirmation signal to set up the SL price.
Take profit
The profit should be set to the nearest support level. But the minimum risk to reward ratio for the trade setup should be 1:3. If not, you should ignore the trade signals and wait for much better opportunities.
London Open Forex Breakout Strategy For MT4 – Useful advice
Smart traders know the fact that they can lose money from the very best trade signals. So, while using the London Open Forex Breakout Strategy For MT4, you should not expect to win all the trades. And make sure you learn to use this trading method in the paper trading account so that you don’t have to deal with technical complexities while dealing with the real market.
You may also try to look for the ranging phase of the market 1 hour before the London session opens. Due to the low volatility of the market, it will be easier to spot such market conditions, and thus you might find reliable trade signals right after the London session opens. But not that, you must wait for the clear breakout of the box to take the trades.
London Open Forex Breakout Strategy For MT4 – Conclusion
To become a successful trader, you have to be well prepared to deal with the losses. Though the London Open Forex Breakout Strategy For MT4 works like a standalone trading system, still you may use the price action confirmation signals. Last but not the least, never become overconfident with this trading method since you never know the outcome of the trades.
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