London Box Retest Forex Trading Strategy

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London Box Retest Forex Trading Strategy 3

London Box Retest Strategy is a strategy that makes use of and profits from the directional hints that occurs during the London trading session. Knowledge and understanding of intraday cycles in forex is a very powerful tool. It gives traders an idea as to the reasons behind certain sudden spikes in volume which often lead to directional moves.

The forex market is composed of three big market sessions, Tokyo, London and New York session. While there are other markets that open up at different times during the day such as Australia and Frankfurt, these three are the biggest. These three markets also have different characteristics unique to it due to the location and the size of the market.

Tokyo is the first among the three markets to open during a trading week. It has about 8 hours of lead time from the London session. It is characterized by a relatively small volume with less volatility. London session, the second market to open is a total opposite. It is the biggest market and with such size comes big trading volumes and more volatility. New York session is somewhat in the middle. It is the second largest market. As such, it also has a relatively high trading volume and volatility.

Given the characteristics of the Tokyo and London sessions, which are polar opposites, there is an opportunity which could be exploited based on these market cycles. Tokyo session, having less volume and volatility often has a fairly tight trading range. Add to it the fact that it has about eight hours of lead time prior to the open of the London session, this allows the Tokyo session to create a well-defined range. Then comes the open of the London market. During this time, there is an overlap between Tokyo and London, which is about an hour, depending on the daylight-saving time. As the London market opens, a sudden influx of volume and volatility occurs. This is due to the pent-up trades that Londoners and the European market have pending as the market opens. As the volatility and volume explodes, the market tends to find itself breaking out of the range created during the Tokyo session. Although it is not a rule of thumb, but often times these breakouts of the Tokyo range would become the theme of the day for the London session.

Forex Breakout Box

Given this knowledge about the characteristics of different sessions, many traders have programmed an indicator which clearly marks the range created during the Tokyo session and the time when the different trading sessions starts and ends. The Forex Breakout Box is one of these indicators.

The Forex Breakout Box conveniently marks the range of the Tokyo session with a crimson colored rectangle. Then, it also marks the start of the London session with an orange and blue line.

Trading Strategy Concept

This strategy makes use of the Forex Breakout Box custom indicator in order to exploit the occurrence of breakouts during the London session.

First, we would have to wait for price to breakout of the box. Price should close above the blue line. Then, we wait for price to retrace to the edge of the box on the side where it breaks out. Then, we wait for price action to create a pin bar indicating the rejection of price on the extreme of the Tokyo session. As soon as a pin bar candlestick pattern closes, we place a pending stop entry order beyond the pin bar to enter the market if indeed the market direction does resume in our direction.

Indicator

  • forex-breakout-box

Template: 5-minute chart only

Trading Session: London session only

Currency Pair: EURUSD, GBPUSD, EURJPY and GBPJPY pairs; other EUR and GBP pairs may work but may need wider stops due to wider spreads

Buy (Long) Trade Setup

Entry

  • Wait for price to breakout above the high of the Tokyo session based on the blue box
  • Wait for price to retrace and touch the blue line
  • Wait for a bullish pin bar pattern to close
  • Place a buy stop order above the high of the pin bar candle

Stop Loss

  • Set the stop loss below the entry candle and below the top orange line

Exit

  • Close the trade as soon as the London session ends

London Box Retest Forex Trading Strategy 1

London Box Retest Forex Trading Strategy 2

Sell (Short) Trade Setup

Entry

  • Wait for price to breakout below the low of the Tokyo session based on the blue box
  • Wait for price to retrace and touch the blue line
  • Wait for a bearish pin bar pattern to close
  • Place a sell stop order below the low of the pin bar candle

Stop Loss

  • Set the stop loss above the entry candle and above the bottom orange line

Exit

  • Close the trade as soon as the London session ends

London Box Retest Forex Trading Strategy 3

London Box Retest Forex Trading Strategy 4

Conclusion

This is a profitable trading strategy that many traders use. However, there are many different variations of this strategy. This a type of a London Breakout strategy. This version however is the aggressive option. It has tighter stop losses which allows it to have bigger reward-risk ratios. It is not uncommon for this type of strategy to have a reward-risk ratio of around 4:1, which is quite high on any standard.

There are other factors which you should also be looking at prior to trading this in a trading day. Some of which are news releases, momentum behind a breakout and the bigger picture trend. Having these filters would allow you to have better win ratios but may also cause you to have lesser trades in a week.


Forex Trading Strategies Installation Instructions

London Box Retest Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator(s) and template.

The essence of this forex strategy is to transform the accumulated history data and trading signals.

London Box Retest Forex Trading Strategy provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.

Based on this information, traders can assume further price movement and adjust this strategy accordingly.

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How to install London Box Retest Forex Trading Strategy?

  • Download London Box Retest Forex Trading Strategy.zip
  • *Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
  • Copy tpl file (Template) to your Metatrader Directory / templates /
  • Start or restart your Metatrader Client
  • Select Chart and Timeframe where you want to test your forex strategy
  • Right click on your trading chart and hover onTemplate
  • Move right to select London Box Retest Forex Trading Strategy
  • You will see London Box Retest Forex Trading Strategy is available on your Chart

*Note: Not all forex strategies come with mq4/ex4 files. Some templates are already integrated with the MT4 Indicators from the MetaTrader Platform.

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