As many already know, forex is the biggest financial market in the world and advantageously befitted to technical trading methods and techniques. This suitability is in no small part attributable to the large amount of Forex market players who often speculate on the daily, and intra day, price movements.
This specific article addresses some of the London open trading style techniques. These can be utilsed to capture part of the large market movements, that stem from the open, as liquidity comes into the opening period.
It is well known amongst top professional and institutional traders that one of the best times to trade Forex is during the London open period around 7:00am GMT. This is the time period when the market can have major depth of liquidity and this often leads to volatility that can be a starting point for many strong trends.
The London open, which is one of the busiest and most liquid periods, follows the Asian session (Frankfurt starts just before London) and often times there can be a trading range imprinted during the Asian session which gives a defined break-out area to trade away from. This can be played as a “bounce” trade rebounding from the range edge or a breakout continuation. Any price move away from this open range area can display serious impulse momentum which means it may not hit the trade trigger point again for quite some time. This obviously gives good potential for high profits if traded correctly and with the neccessary discipline.
So lets look at some of the positive and negatives of trading this way.
On the pro side utilising the London Open technique often enables a highly skilled trader to capture the days pips before lunch time or earlier and potentially frees much of the rest their day (this is an assumption that the aforementioned trader lives in a similar time zone to London).
There is of course a downside and that is that the individual needs to possibly be on hand, in front of their computer, during the London open unless of course they have a computer/robot EA executing orders for them which is outside the scope of this article. Some traders however get around this issue by using an iPhone or similar device to monitor the action while on the move.
Here are some of the approaches taken by London open traders:
• Fibonacci based entries.
• Pattern breakout techniques.
• Volatility breakout methods.
• Fundamental news traders using the frequent releases at this time of day.
• Using other chart patterns like head and shoulders and trend lines etc.
I will not try to cover all of the techniques used by these traders as this is an entirely different area which needs to be covered in depth and demands study and time.
The article also does not look at exit techniques and these are possibly even more important than entries as letting profits run is of paramount importance.
The list above could indeed be many times longer but the main message of the article is that whatever style you use the London open can give the momentum to capture large moves. I address a lot of the forex trading techniques and processes in other articles.
All of the major currencies can be traded during this time but the pound dollar pair is particularly suited to the approach.
One other critical point is that It is important for rookie traders to find and try to learn an uncomplicated robust effectual technique and paper trade until they have shown themselves the effectivity of a specific trading way. This should be done ahead of going live with with any trading. Every market participant is looking to make money for themselves and it can be very risky if not taken seriously with good risk management employed.
Article Source: http://www.articlesbase.com/day-trading-articles/london-open-trading-techniques-4659760.html
About the Author
The author can be found writing at this Forex Trading blog.
Tags: day trading, impulse momentum, institutional traders, liquidity, lunch time, open period, open range, price move, style techniques, trigger point, volatility