London Trend Continuation Forex Trading Strategy

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London Trend Continuation Forex Trading Strategy

The forex market is unique. Unlike the stock market, which is the most popular trading market, the forex market operates 24 hours a day for more than 5 days a week. It never closes. As long as there is a country that is exchanging the currency pair, that particular currency pair would still move.

Having a market that does not close at the end of the day means that there are limitless opportunities that traders can take advantage of. Traders have the option not to rest and try to profit from the market as long as they want. This seemingly unlimited opportunities cause many traders to believe that it is in their best interest to trade 24 hours a day for the whole trading week.

Although theoretically traders should be able to profit more if they trade the forex markets more often, for most manual retail traders, this does not do them well. Fatigue could set in causing traders to make mistakes and lose money. Some use trading robots or algorithms to trade for them non-stop. However, you are also at the mercy of the algorithm not making a mistake.

One good option would be to trade the forex markets only during the times of the day where the most opportunity is presented. The London trading session is probably one of the most active times in a trading day. This is because the London market is the largest market in forex. London opens also usually have a strong breakout momentum which leads to an intraday trend that would dictate the direction of the remaining market hours.

London Trend Continuation Forex Trading Strategy revolves around the idea of trading based on the explosive potential of the London open. It uses a few indicators to help traders identify the higher timeframe momentum and the specific entry points where traders can enter the market.

Sessions Indicator

Sessions indicator was developed in order to assist traders in identifying the open markets or trading sessions whenever they trade.

This indicator identifies and indicates the open markets by plotting boxes with different colors to indicate the market session. The Asian session is shaded with color forest green. The European or London session is shaded with purple. The US session is shaded with blue.

Traders could then use this information to help them time when they should trade and when they should stop trading. Some traders would prefer to trade only during the London open. Others trade only when the London and US sessions overlap. Others trade only during the Asian session. Others would avoid trading during the quiet Asian sessions. It would depend on what strategy you are using and the logic behind the timing of the trade.

3 MA Cross with Alert

3 MA Cross is a trend following indicator which provides trend reversal entry signals based on moving average crossovers.

Moving averages are one of the most widely used technical indicators when it comes to trend following and trend reversal strategies. Traders mostly use it to identify trend direction. However, another popular way to use moving averages is by using the crossovers of moving averages as a trend reversal signal.

Crossovers of moving averages indicate that a faster moving average is crossing over a slower moving average. This means that the short-term trend or momentum is shifting or reversing causing it to cross over the longer-term trend.

Some traders use the crossover of two moving averages, others use the crossover of price action and a moving average line, while others use the crossover of multiple moving average lines.

3 MA Cross with Alert uses three modified moving averages to help traders identify the ideal trend reversal entry point. The indicator simply plots an arrow indicating the trend reversal. Traders could use these signals to enter and exit trades.

Trading Strategy

This trading strategy is a momentum following strategy which trades in the direction of the trend established during the prior day.

To identify the direction of the momentum, we will look at where the location of the Asian session is in relation to the US session. If the Asian session is above the upper half of the US session of the prior day, then momentum is considered bullish. If it on the lower half, then momentum is considered bearish.

Aside from this, we would also consider the range of the current Asian session. If the Asian session is contracted, we could assume that the market still has a strong potential to gain momentum once again as London session opens.

If the criteria above are met, we could then wait for a trend reversal signal coming from the 3 MA Cross with Alert indicator to point the direction of the momentum. This should occur during the early parts of the London session. Trades are then closed before the US open as there might be some news releases that can cause the momentum to reverse.

Indicators:

  • 3_MA_Cross_w_Alert_v2
  • Sessions

Preferred Time Frames: 15-minute chart only

Currency Pairs: FX majors and minors

Trading Sessions: Tokyo, London and New York sessions

Buy Trade Setup

Entry

  • The Asian session box should be on the upper half of the US session box.
  • The Asian session box should have a tight range.
  • The 3 MA Cross indicator should plot an arrow pointing up during the early stages of the London session.
  • Enter a buy order upon the confirmation of these conditions.

Stop Loss

  • Set the stop loss below the Asian and London box.

Exit

  • Close the trade before the start of the New York session.

London Trend Continuation Forex Trading Strategy

London Trend Continuation Forex Trading Strategy 2

Sell Trade Setup

Entry

  • The Asian session box should be on the lower half of the US session box.
  • The Asian session box should have a tight range.
  • The 3 MA Cross indicator should plot an arrow pointing down during the early stages of the London session.
  • Enter a sell order upon the confirmation of these conditions.

Stop Loss

  • Set the stop loss above the Asian and London box.

Exit

  • Close the trade before the start of the New York session.

London Trend Continuation Forex Trading Strategy 3

London Trend Continuation Forex Trading Strategy 4

Conclusion

London breakout strategies are some of the most popular trading strategies.

This is because London breakout strategies have the potential to produce huge returns while allowing traders to risk a little using tight stop losses. This is because the transition from the tight ranging Asian sessions to the strong momentum breakout markets of the London sessions allow traders to place tight stop losses while allowing price to run according to the strength of the trend.

Traders who can logically identify trend direction, price action and momentum can use this strategy to exploit the sudden burst of momentum that occurs during the London open.

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