This GBPUSD breakout forex trading strategy is designed to capture the early market breakout of GBPUSD currency pair during the Eropean forex trading session.
And you can also apply it to the EURGBP currency pair if you chose to.
Why GBPUSD & EURGBP?
Because these two currency pairs tend to be actively traded during the European forex trading session.
Here’s How It Works
The GBPUSD breakout strategy is all about trying to get into a trade very early on just before the marker or price is starting to establish its trend for the day?
Well, if you can get in early, you tend to get the most out of the trend move for that day.
So how do you get into a trade early then?
Answer: you need to know what times the London and Frankfurt Markets opens in the mornings:
- The Frankfurt Market Opens at 7:AM GMT
- An Hour later, the London Market opens at 8 AM GMT
This is the European forex session when Europe starts trading forex .
Currency Pairs You Can Trade
GBPUSD and you can also trade EURGBP
Timeframes To Trade?
You need two timeframes for this GBPUSD breakout strategy: the 1hr and 5min timeframes
Any Forex Indicators Required?
You don’t need to use any forex indicator with this forex trading system.
GBPUSD Breakout Forex Trading Strategy Rules
To be able to trade this system, you need to be ready before the European Forex Market opens.
- First, you need to open up the 1 hr chart of GBPUSD or EURGBP.
- Mark the high and low of that 1 hr chart with 2 parallel horizontal lines. This creates your price tunnel as shown on this chart below:
- Then switch to a 5 minute timeframe chart and wait for a candlestick to close outside of the tunnel.
- if it close above the top line, you initiate a market order or you can place a pending buy stop order 2 pips above that candlestick and wait for it to be activated. If a 5 minute candlestick closes below the bottom line, you can sell at market order or place a pending sell stop order 2 pips below the low of that 5 minute candlestick.
- You should place your stop loss 2-10 pips outside of the tunnel lines.
- Calculate your take profit based on 1:3 risk to reward ratio or use previous swing highs/swing lows for profit targets.
Advantages Of The GBPUSD Breakout Forex Trading Strategy
- an easy price action breakout trading system
- if the breakout happens and trend is true and good, you can be anywhere from 100-150 pips in profit during the day.
- you can use this as a set and forget forex trading strategy if you have a day job.
- you only have one (minimum) or 2 (maximum) trades per day which reduces over-trading (which is good!). Less is more in forex trading.
Disadvantages of The GBPUSD Breakout Forex Trading Strategy
- no forex trading system is the holy grail and price can cause whipsaws which an take out your stop loss.
- sometimes, the tunnel distance can be huge which is not good because it significantly reduces your risk:reward. What I suggest is that if the tunnel distance in pips (difference between high and low) is more than 40 pips, I do not take the trade.
I hope you’ve enjoyed this trading system. Please don’t forget to share your friends by clicking on those sharing buttons below. Thanks.