London Breakout / Daybreak Strategy Explained -- with David Moadel
hello friends and welcome to looking at the markets with David Modell today I'm
going to give a basic explanation of the London day break strategy also called
the lot London breakout strategy ok and before I get started if you need any
coaching I do offer that for putting together a trading or investing plan
because you really want to have one or if you need help with charts and
candlesticks and technical indicators picking out stocks to trade options
things like that you can contact me by email at David Modell at gmail.com also
I have a number of free financial reports you can download one or as many
as you want you can find them in the description
below this video you can click on show more and it'll show you all the
different free reports so feel free to check out those financial reports
alright so the London Day break or breakout strategy explained this is the
version of the strategy that I'm aware of and might not be the same as what
other people would call the London Day break or breakout trading strategy so
this strategy is to be used when the London session opens at 8 o'clock a.m.
London London time which would be 3 o'clock in the morning eastern US time
therefore it's mostly applied to currency or forex trading because it's
at a time when the New York Stock Exchange and the Nasdaq exchange are not
open in the United States but I'll mention later that this strategy can be
modified to New York Stock Exchange stocks or the Nasdaq stocks you would
just have to modify it ok so you can't apply this to stocks and things like
that so first check the news and make sure that there are no major economic
events that could cause problems for this strategy which uses technical
factors rather than news related events all right you want to make sure if
possible that some news related event is not going to skew or ruin the results
here all right so if you're going to use this for currency pairs you want to
choose a currency pair with plenty of volume or liquid
such as the Great British Pound to the US dollar for example or the Euro to the
US dollar or the Japanese yen to the US dollar that kind of thing and if you're
going to apply this to stocks then you want to pick stocks most likely with
plenty of volume plenty of liquidity because this is mainly an intraday
trading strategy so you want to be able to get in and out of your positions
easily without a lot of slippage alright so if you're using this as an intraday
strategy which is the main purpose of this then you should put up a 1 to 3 or
5 minute candlestick chart keep that ready on your screen because those are
ideal for day trading intraday trading so after the London session opens if the
price is below the 50 period exponential moving average or EMA if it's below
that's going you're going to consider that to be bearish and so that's good
for a short position so if it's below the 50 period EMA wait until the price
closes below the lowest price of the last 4 candlesticks so look at the last
4 candlesticks alright find the lowest price including the wick or shadow okay
of those 4 candlesticks not just the body then you can take a short position
if it closes below the lowest point of the last 4 candlesticks this is all only
if it is below the 50/50 period EMA alright so then you can take a short
position and your stop-loss will be at the highest point the highest
price of those same 4 candlesticks including the wicks or shadows ok I'll
show you what that looks like all right I drew a picture here all right so as
you can see after the session opens the candlesticks are you know they're below
the 50 period moving average exponential moving average here all right so find
the lowest and and wait until four candlesticks form obviously so you can
judge and find out where the if you want you want to take a short
position because it's below the moving average and you're gonna follow that
trend that bearish trend so you find the lowest point of those for the last four
candles including the wicks or shadows so here it is that's the lowest point
okay and I drew a box around it to help me identify the lowest point and the
highest point of those four candlesticks because the highest point will be the
stop-loss which is the dotted line here alright so but enter after a candlestick
closes below the lowest point of those four candles all right and it happened
like immediately like right here it doesn't always happen immediately I mean
it could have happened later you know or not at all sometimes if it doesn't
happen at all then you don't take a position that's okay but you know in
this case it happened the very next candle after the first four that's okay
and so I would take a short position here all right the first time it closes
below the lowest point of those four first four candles or the last four
candles I should say all right so take a short position and it started to go
against me so I have a stoploss which is the highest point of those last four
candles all right which is right here so starting to go against me but I didn't
get stopped out and it went down and down and down and I did quite well with
that okay and you also want to have an idea of when you're gonna take a profit
but that's a whole different you know whole different video all right I do
have videos on you know taking profits you know finding out when to do that but
anyway so that's for taking a short position now what if you want to take a
long position well if the price is above the 50 period EMA okay so this was an
example of below alright for a short position if the price is above the 50
period EMA wait until the price closes above the highest price of the last four
candlesticks so it's just the opposite basically and then you can take a long
position you can buy and the stop-loss would be at the lowest price
of those four candlesticks so it's just the opposite you just flip it all around
okay so I'll show you an example that I drew
all right so as you can see you know the session opens and you know you wait for
four candlesticks at least to form and then hey okay you look at the last four
candlesticks and they're above the 50 period EMA and so I'm going to take a
bullish stance on this so I'm thinking about taking a long position and so you
would wait until a candlestick closes above the highest point of the last four
candles all right and you would say your stop-loss at the lowest point of those
last four candles that's a dotted line here all right and again it happened the
very next candle it doesn't always happen like that I don't want to give
the wrong impression you know could wander around and then break above that
point you know here here wherever okay or it may never happen it may just go
down and never close above this point and that's fine you don't take take any
position then all right so the very next candlestick had happened to close above
the highest point of those four candles and so I took a long position and I was
never in any jeopardy of getting stopped out but if it did go down I would get
stopped out right right here okay but it just went up and up and up all right now
you can actually enhance or improve on this strategy here's how to enhance this
strategy you can create a sort of a trailing stop loss by updating your
stop-loss every hour to the lowest price of the previous three candlesticks for
long positions or the highest price of the previous three candlesticks for
short positions all right and so in other words you can update where your
stop-loss is every hour all right so it's you're kind of trailing it in a way
or at least updating it so you know every hour just look at the last three
candlesticks and you could draw a box again around it if you want to or or
just find out where the lowest point is of those three candlesticks
and including the wicks or shadows and that could be your new stop-loss if
you're taking if you took a long position if you took a short position it
could be you know updated for look at the last three candlesticks and change
your stop-loss to the highest point of the last three candlesticks for short
positions okay so what if you go for a long time without getting stopped out
well if you haven't been stopped out by the end of the London and and we're
assuming you happen to take in profits as well it's a good idea to know where
you're going to take profits you know I'd either buy a you know percentage
gain or you know dollar gain or you know whatever the currency is so you want to
have some sort of take profit calculation in mind as well but let's
say it just goes sideways for a long time so let's say if you have not been
stopped out by the end of the London trading session it is recommended that
you exit your position just get out in order to avoid big gap ups or gap downs
you know the next day alright because this is meant to be closed by the end of
the of the session of the trading session so it's it's intraday and this
strategy as I mentioned could be modified to use other times of the day
such as the New York Stock Exchange trading session or the Nasdaq whatever
so this can be used for stocks and other types of asset classes all right so be
aware that like all all trading strategies this does not work 100% of
the time and it is a good idea to always test it out with virtual or paper
trading for a while to make sure that it works for you before committing any real
capital or money to it alright so please be careful out there take small
positions and it's okay to take no positions for a while and just learn
about it at first all right and speaking about learning you know if you need
coaching if you're looking for coaching for help with these kinds of things or
putting together a plan my name is David Modell you can email me at David Modell
at gmail.com and again please check out those free reports below this video in
the text description download as many as you want all right
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I'll talk to you again soon
you