what if we enter the market when the
price breaks the asian session's highest
and lowest price levels or in another
word what if we back test the london
breakout trading strategy 100 times
using an indicator
do you think it's a profitable strategy
should we trade the london session
according to the prize performance
during the asian market well let's
review this strategy and back test it
together to find out
[Music]
a few days back we received an
interesting trading strategy from alex
olsen who's one of our subscribers it's
not very different from the london
breakout trading strategy that we back
tested last time and traded in live
market conditions
as usual we'll review the strategy and
see some examples from the chart once
done we'll begin back testing the
strategy with the help of a trading
indicator that alex has sent us i'll
leave a link in the description box if
you're interested in downloading it
if this is your first time here don't
forget to subscribe to the channel and
give this video a thumbs up for the
youtube algorithm
with that being said let's get into it
this strategy relies on the performance
of the price during the asian session in
simple terms the london breakout
strategy is a day trading method that
seeks to take advantage of the trading
range prior to the london opening
session
london breakout trading strategies are
popular among traders these days as it
allows them to trade forex or other
financial securities according to the
performance of the price during the
asian session
the most basic form of establishing the
asian market range is to use the high
and low of the previous trading session
this method takes into consideration the
whole price action since the start of
the new trading day
the advantage that comes with this
approach is that it will help you better
manage your trade and you can have
enough time to look at the fundamentals
before entering the market well let's
look at this example
this is the euro usd one hour chart we
all know that each candle represents one
hour the asian session runs for nine
hours usually opens at 11 pm and closes
at 8 am gmt
according to this strategy will only
take into consideration the last four
hours before the opening of the london
session this way we'll have a narrower
range
so to define the london breakout range
that we'll be using on a given day we
need to draw support and resistance
levels based on the last four hours
before the london opening
i'm using a free indicator called
sessions by junior fx attic it helps
highlight the different forex market
sessions
i've disabled the new york market and
kept the asian one in red and the london
session in green
as we're working on a one hour time
frame that's going to be the last four
candles we should take into
consideration the body of the candles as
well as the wicks
let me use the rectangle tool to define
the price range that we can rely on as
part of the london breakout strategy
we're testing today we can consider the
two lines as our support and resistance
levels
once the market range is drawn we'll
just monitor the price movement and wait
for the price to break above or below it
to make life easier we can set two price
alerts most trading platforms allow you
to do this and since we're using trading
view we can simply click on the clock
icon and hit here to create a new price
alert
first we need to select the pair we're
trading then choose cross up or down
from the drop down menu for support
select crossing down and type in the
support price value you can choose the
alert actions i always use mobile app
notifications as it's pretty practical
that's it just hit on ok and do the same
thing for the resistance price value
perfect now all we need to do is wait
for the price to hit the upper or lower
levels
so what to do next
according to the strategy once the price
hits either the support or resistance we
should immediately go down to the 30
minutes time frame and wait for any
candle that closes either above or below
our price range if a candle closes above
the price range we immediately go long
on the other hand we go short if the
candle closes below the price range
let's look at this example
we can see here that the price crossed
below our range as a second confirmation
we need to look for a candle that closes
below the asian market range which is
our selling signal we can see a strong
downtrend that formed at this stage and
it has a 100 pips potential imagine if
you ride this trend all the way down
before we begin back testing let's look
at a second example
this is the pound usd 30 minutes chart
we proceed to define our range
the last four hours before the london
opening should be represented with eight
candles we can extend the rectangle from
the left side
it's clear that the price crossed above
the price range and closed above it this
is going to be our entry signal so we
immediately go long
that's another successful trade
all right now it's time to back test the
strategy 100 times
today we'll be using a free indicator
that's designed according to this
strategy
you can find a link to download it in
the video description box this indicator
is called three-tier london breakout and
is developed by mer 7 1898
anyway this indicator highlights in blue
the last four hours before the london
opening
and tells us the number of pips between
the support and resistance levels this
value will be used to define the take
profit and stop loss
so basically the take profit is
positioned according to the width of our
price range let's call that value l
these can be adjusted from the indicator
settings but initially we'll have the
first take profit at 3l distance from
our entry point
so we'll always target the buy or sell
target number three
regarding the stop loss we'll just place
it at a 2l distance from our entry
so to sum up we're risking 2l for a
profit of 3l that's a 2-3 risk to reward
ratio
let me know in the comments section if
you have any questions about this
strategy
all right let's begin back testing we'll
use a one thousand dollar balance and
stick to one micro lot volume size
while waiting for the results don't
forget to hit the thumbs up button and
subscribe to the channel if this is your
first time here you can also submit your
trading strategy for back testing simply
visit this link and provide the
necessary details about your trading
method
this indicator might show you different
values based on the settings as well as
your server's time management since
we're using mt4 depending on the mt4
broker's server time the charts or the
candlesticks on the charts are
calculated differently for example most
gmt brokers tend to have an additional
candlestick such as sunday candlesticks
as well while this might not be a big
issue when you're using a trading
strategy that has time as a major factor
the result could differ from one broker
to another
we've just completed back testing this
strategy let's look at the results
well the success rate is 68
and we've only got 32 losing trades we
managed to make 1 812 pips in total so
to sum up we started this back testing
process with one thousand dollars and
ended up with one thousand one hundred
eighty one dollars that's one hundred
eighty one dollars total profit it's
amazing right
well at this stage i do believe that the
figures are quite positive but the
market entry and exit points are not
quite clear and flexible
to be honest with you i'm afraid that
this strategy alex isn't designed to
ride the trends and super trends
i quickly run through some of the losing
trades they're mostly due to a sideways
market condition and failure to spot
some key market structures for example
we can see here a long entry signal but
the take profit which is tp3 is located
beyond a major resistance other than
that the entry candle was followed by
two significant long bearish and bullish
candles that illustrate the uncertainty
of the market plus this strategy doesn't
consider fundamentals
well we'll probably need to turn this
indicator into an expert advisor to have
the ability to back test it over a
longer time interval let me know if you
want us to cover that in the future by
the way we've already made a live market
video where we traded forex using a
london breakout strategy you can click
on this link to watch it
so what do you think about this london
breakout trading strategy let us know in
the comments section and don't forget to
check out the other videos on this
channel
happy trading
you