London Breakout 1

[muthusai2000]

Not sure about the trendline for the short?
I guess it’s in line with the “rules” but I might have taken the earlier swing low. Cable looked like it was finding support in the 1.6060 region overnight.
I had a long going on my trade today, which was stopped out for -30, cable then bounced again. One of those things.

Thank you SanMiguel,

Its one of the Sunday Candles as they call that i used to plot the swing low. I am not sure if it pops up in all broker charts. I use IBFX. Monday looks bit different in candle setups as brokers use different time frames when they open and i believe not all have sunday candles in their charts.

Regards,
Muthu.

[muthusai2000]

[muthusai2000]

This trade floated all rules so to speak as far trendline goes. It was not connecting any of previous day’s candles. Moreover, I decided to avoid short trades as euro was in a strong uptrend. EU was ranging for few hours struggling to break the day’s high convincingly, before the trade made an exit for a profit at the Resistance Level marked “Exit”.

Regards,
Muthu.
Chennai.
India.

[poca]

looks like a good trade

[muthusai2000]

[muthusai2000]

Regards,

Muthu.
Chennai.
India.

[muthusai2000]

[muthusai2000]

Regards,

Muthu.
Chennai.
India.

[trader1000]

[B]London Breakout 1[/B]

[B]This London Breakout strategy has a win ratio of over 90%[/B].

[B]Currency pair:[/B] GBP/USD, EUR/USD - tested. Other pairs may also be used.

[B]Time frame:[/B] 1 hour

[B]Indicators:[/B] none

[B]At this point it might be an idea to bring up the chart at the bottom of this post and read the strategy whilst looking at the chart.[/B]

[B]Trading setup:[/B]

For this Forex system to work properly a trader needs to know the basics of drawing trend lines and be able to identify support and resistance lines.

[B]Our working range includes 5 candles:[/B] from midnight to 04:00 EST (including the 04:00 candle).
Optional: draw a midnight vertical line for visual aid.

With those 5 candles look for valid swing high and swing low of the price.
Draw a downtrend trend line connecting a found swing high to the most recent swing high of the previous days (make sure the last one is a valid high to draw a downtrend trend line through it).
Do the same for a swing low: connect it to the most recent swing low of the previous days, make sure you are putting in the right trend line using the rules of drawing uptrend trend lines.

If a trader sees, for example, no swings high in the 5 candle range, that means there will be no downtrend trend lines this morning.

[B]The Entry[/B] is on the break of either one of the two trend lines and is immediate without waiting for a current candle to close. A protective stop is placed just above/ below the candle that broke the trend line.

[B]Profit target:[/B]

Usually the whole trade will unfold within the next three candles (count in the candle that broke the trend line).
So, after the actual breakout we have 3 hours or 3 candles to trade, after that we will exit the trade with whatever profits are made.

[B]Main rule- Using S/R + timing:[/B]

Profit target is going to be the nearest level of support or resistance according to the S/R lines.
If, however, after only one candle this target is reached, it suggests a very strong market, we would therefore stay in the trade and set our goal for the next support/ resistance level. We would also choose the second S/R level as our profit goal if the first S/R level appears to be close to our entry point.
We have three candles to trade after the breakout, thats why we can trade calmly and allow our goal to shift to the next S/R level.

It is at the traders absolute discretion whether to set the target at the nearest S/R level and exit the trade once the target is hit or use 2 or 3 consecutive candles.

[B]Another simplified option would be with fixed targets and timing.[/B]

For example, EUR/USD target = 20 pips - spread. GBP/USD = 40 pips - spread. These are only suggestions. For other currency pairs you will need to back or forward test.

Thats it! Properly applied this London breakout strategy is more than 90% effective.

Good luck and good trading - Robert.

Thanks to: Edward Revy

My first London breakout 50pips on GU.
Thank you.

[SanMiguel]

My first London breakout 50pips on GU.
Thank you.

Today? GU hasn’t even moved 50 pips out of it’s range yet!
From the 6am candle, it moved 25 pips before reversing.
7am trendline hasn’t yet broken.
Under the strict rules that is
Muthu’s chart above is an early breakout though could have also been a support line trade.

[ADELEKE]

Regards,

Muthu.
Chennai.
India.

hi Muthusai, I think i may need a little clerification on this great system, my understanding is that you draw your trendlines after the fifth candle is completed.However, today it seems you were using the forth candle. Or Was i mistaken?

[BlackSwan]

I went for the early breakout and failed. Hit my stop of 30 pips.

[SanMiguel]

My current chart - I have not yet taken a trade with this due to a GU support line 1.6065ish.

The black lines are the Asian session high and low.
Blue line = pivot point.
Red lines = pivot resistance areas.
Green lines = pivot support areas.

[SanMiguel]

I went for the early breakout and failed. Hit my stop of 30 pips.

You going for a set stop instead of a stop above the 1hr candle?
The early breakout is a difficult one as Frankfurt/London open can often reverse the direction…of course sometimes it moves further in your favour but as for probability…
Of course, if you can grab the pips then fine.
Anyone actually backtested the early breakout?

If you want to backtest…and you really should…you will have to spend a while going through charts and comparing early breakout vs 0700 vs 0800.

[BlackSwan]

You going for a set stop instead of a stop above the 1hr candle?

I use the body of the one hour candle as my stop unless it is more then 30 pips, then I use 30 pips. Do you use the wick or the body for your stop?

What time period are you using, in GMT? 0500-0900?

[muthusai2000]

@SanMiguel

Today? GU hasn’t even moved 50 pips out of it’s range yet!
From the 6am candle, it moved 25 pips before reversing.
7am trendline hasn’t yet broken.
Under the strict rules that is
Muthu’s chart above is an early breakout though could have also been a support line trade.

@ San Miguel:

Just curious if your trend line that you are looking for a break to trade looks similar to the one i drew (Marked with a white arrow) . Yes it was an early breakout trade that i took today on both Euro and Cable.

Regards,
Muthu.

Edit: Didn’t check your chart that you posted before posting mine.

[SanMiguel]

I use the body of the one hour candle as my stop unless it is more then 30 pips, then I use 30 pips. Do you use the wick or the body for your stop?

What time period are you using, in GMT? 0500-0900?

I use the breakout time of Frankfurt open or London open - subjective depending on the momentum and other factors like SR.
I also use the Asian session high/low in my analysis but that’s separate from the method described on p1.
I know there is some confusion over the timings as the post was written during the summer and the whole British summer time / GMT thing confused it a bit.
My opinion, and perhaps you should PM RCarter on this, is that it is a breakout strategy designed for London open (0800 local).
SL - I would use the wick but it depends entirely on your target. If you are only going for a 30pip target then I can fully understand why your SL is at 30pips.

@ San Miguel:

Just curious if your trend line that you are looking for a break to trade looks similar to the one i drew (Marked with a white arrow) . Yes it was an early breakout trade that i took today on both Euro and Cable.

Regards,
Muthu.

Edit: Didn’t check your chart that you posted before posting mine.

Yes, same trendline

[muthusai2000]

hi Muthusai, I think i may need a little clerification on this great system, my understanding is that you draw your trendlines after the fifth candle is completed.However, today it seems you were using the forth candle. Or Was i mistaken?

You are right I used the 4th candle today. Since I am trading these early breakouts, I am not following a set pattern of candles that i choose to drew trendline. However, most of the time i want to wait till 5th candle close to see if i can draw appropriate trend lines. Backtesting will be a great idea though. By selecting any given day moving one candle at a time using F12 (So you dont get to see the whole candle patterns at the same time and hence can draw trend lines without getting influenced by what has already happened). The idea behind this, is to get used to drawing trend lines and then move the chart one candle stick at a time to see how ur trend line break worked. I am trying this out although i dont find time to go full fledged as i am working as well. Has anybody tried this ? This idea was given to me by one of my friends out here in babypips.

Regards,

Muthu.
chennai.
India.

[muthusai2000]

Yes, same trendline

Thank you SanMiguel.

[SanMiguel]

@muthusai2000

You are right I used the 4th candle today. Since I am trading these early breakouts, I am not following a set pattern of candles that i choose to drew trendline. However, most of the time i want to wait till 5th candle close to see if i can draw appropriate trend lines. Backtesting will be a great idea though. By selecting any given day moving one candle at a time using F12 (So you dont get to see the whole candle patterns at the same time and hence can draw trend lines without getting influenced by what has already happened). The idea behind this, is to get used to drawing trend lines and then move the chart one candle stick at a time to see how ur trend line break worked. I am trying this out although i dont find time to go full fledged as i am working as well. Has anybody tried this ? This idea was given to me by one of my friends out here in babypips.

Regards,

Muthu.
chennai.
India.

Yes, you can also use the trade simulator to collect stats for you.
Attached.

Trade_Simulator_setup.zip (491 KB)