This forex trading system is called the 2 hour london open forex trading system. It is a simple price action trading system, designed to capture the breakout of the high and low of the 2nd hour candlestick after the London forex market opens.
Currency Pairs: GBPUSD, GBPJPY, GBPCHF
Timeframe: 1 hour
Indicator: Sessions (shows you the beginning and end of asian, london and new york forex trading session)
- 2 hours after the london market opens, and as soon as the 2nd hour candlestick closes, place 2 opposite buy stop and sell stop pending orders on the high and low of that 2nd hour candlestick. As soon as one pending order is activated, you must cancel the other immediately.
- These pending orders must be 2-3 pips above the high or low of the 2nd hour candlestick.
- the stop loss must be placed 2-3 pips above/below the high/low of the 1st hour candlestick IF it is the greatest distance away from the entry price level, if not use the high/low of the 2nd candlestick. Confused? Let me explain. There will be times when if you enter a buy stop order, you will see that the low of the first candlestick is near the entry price but the 2nd candlestick has a low that is a bit further away, so you need to use the low of the 2nd candlestick to place your stop loss. Do the exact opposite on a placing a stop loss for a sell setup.
- Take Profit Target set at 30 pips
- It is suggested that you do not move stop loss to break even or use trailing stop technique to lock in profits. You just let your trade run and let the market give you the profits or losses.
A Quick Backtest
Now, based on the rules above, I just did a quick back test from March 7 th to 23rd 2016 on GBPUSD currency pair and the results are bit amazing I must say.
I must apologize that the test data is very little and from a statistical perspective, this is not sufficient.
But having said that, If I know how to code an expert advisor and run some back test, I would have done a comprehensive analysis of this trading system but poor me…my mind does not think in codes….
So if you are coder reading this, maybe you can help…
Here are the results by the way:
Disadvantages of the 2 hour london open forex trading strategy
- some may find that making only one trade a day may not be exciting.
- significant forex news release can impact the trade therefore, head over to forex factory calendar to know what kinds of forex news are coming out and you may decide to take whatever profits you have already or move stop loss to break-even before a news comes out just to minimize your trading risk, just in case.
- ranging market during the first 2-4 hours of the london market can create havoc sometimes and getting you stopped out.
Advantages of the 2 hour london open forex trading system
- simple easy to understand price action breakout trading system
- profit target is easily hit during the first hour after the trade is activated or if not can be 2-3 hours later.
- you make only one trade a day (if you only trade one currency pair) and this is good because it stops you from over trading.
- a stay at home mum can use this trading system with ease
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