20 Pips Asian Session Breakout Forex Trading Strategy.
The 20 Pips Asian Session Breakout Forex Trading Strategy is a trading system designed to capture the breakout of the asian trading range during the london forex trading session.
Let’s be honest, many forex traders don’t like trading the asian forex trading session…why?
For one simple reason only: price does not travel too much at all which simply means less trade volume compared to the London and New York forex trading session.
But don’t hate the Asian session just yet…and with this asian breakout strategy I will show you why.
Ok, first things first: don’t get confused...you are trading in london forex trading session but what you need to look at is the asian forex trading session to do that. I will explain a bit more below.
This forex trading strategy is almost similar to the london breakout forex trading strategy but the difference here is that you are aiming for only 20 pips profit each trade.
Currency Pairs : GBPUSD, GBPJPY, EURGBP, EURJPY.
Timeframes: You can use 15, 30mins or 1hr timeframes.
If you’ve traded long enough in the forex market, one thing you will notice is that the the forex market during the asian trading session is usually thin and does not much volume and volatility.
Because of this, you will generally tend to see the Asian market will be in consolidation (traveling in a narrow range).
But that soon changes as soon as the London and European forex market opens, the volatility and the volume increases and this causes price to breakout of the Asian session market consolidation.
This Asian Session Breakout Strategy is designed to capture that breakout.
Now, you need to refer to this forex chart below when you go over the rules of this breakout trading strategy:
THE TRADING RULES.
The trading rules for the 20 pips Asian trading strategy are really simple:
At least 1hr before the London market opens, you need to identify the highest high and lowest low of the Asian trading session. The ideal situation would be that the Asian session was traveling in a tight range during that day. If the Asian session was in a good trend and not in a consolidation during the day, then if you tried to find the range, it would be too high…which means your stop loss would have to be very large to cater for that wide range! So only target days where you really see tight trading range during the Asian trading session. Place a buy stop and sell stop pending orders at least 2-3 pips on both sides of the consolidation. The stop loss of the buy stop order should be placed 2-3 pips below… on the other side where the sell stop pending order was placed and the stop loss for the sell stop order should be placed 2-3pips above the highest high of the consolidation…where the buy stop order pending order was placed. Set take profit targets for both pending orders at 20pips. Wait for a breakout to happen. When one of the pending orders is activated, then immediately close the other other that has not been activated.
Trading Tokyo.
Price action and Macro.
The Asian Trading session is The Best Time of Day to Trade Forex , as explained in the DailyFX Traits of Successful Traders series . This article will walk through the nuances and traits of this trading period, while providing ideas and strategies for traders use when ‘Trading Tokyo.’
Some traders from the United States look at the Asian trading session begrudgingly. After the numerous pips that can be mounted (or lost) during the more volatile London and US sessions, those traders are left wanting more; as the Asian trading session is typified by small movements, decreased volatility, and potentially more stringent adherence to pre-established support and resistance levels (with smaller probabilities of ‘breakouts’.)
This would be akin to someone saying they didn’t like buffets simply because there were too many healthy options. After all, you don’t HAVE to eat that tofu, you can always go and buy a steak if you want it; much in the same way you don’t HAVE to take a trade during the Asian session.
But luckily the similarities between trading and tofu pretty much end there, and the Asian trading session offers liquidity to the FX market after the US closes its doors for the day at 5:00 PM, until London Opens the following morning at 3:00 AM. This leaves a pocket of 10 hours in which traders can stage an approach in what is, typically, a more ‘quiet’ market.
Because the primary liquidity coming into the market is from Asia, movements – in general – can be quite a bit smaller than what will be seen during the London or US sessions.
In the DailyFX Traits of Successful Traders series, Quantitative Strategist David Rodriguez takes a closer look at how volatile currencies can be throughout the day. The findings absolutely confirm the fact that currencies – in general – move less during Asia.
In the chart below, David is examining the most popular currency pair in the world to service as a proxy for this test of volatility.
Prepared by David Rodriguez in the DailyFX Traits of Successful Traders.
From the graph, we can see the ‘average hourly move’ made by the EURUSD currency pair over the tested period was lowest at 4pm Eastern time, shortly ahead of the opening in Sydney.
As liquidity continues to be fed into the market over the hours that follow, we can notice that the ‘average move’ stays quite a bit lower than what is seen during the more ‘active’ times of the day, such as the London Open at 3AM, or the beginning of the London/US Overlap at 8AM Eastern.
This leads many traders to feel that the Asian session is ‘unexciting’ or maybe even difficult to trade. Those two facets couldn’t be more unrelated. As a matter of fact, the quiet nature of the Asian session may allow traders to more functionally manage their trades. The slow nature of the market can potentially allow for more thorough analysis of risk and reward. Because of this…
In the Traits of Successful Traders series , David began by examining trader profitability throughout the day (You can certainly hit the source link for more thorough information).
The contrast in trader profitability on the major currency pairs is drastic. Traders during the ‘Asian Session’ showed far better results than traders during the more volatile US and London sessions.
The reasons for this can be numerous, key of which is the ‘slow and low’ nature of the FX market during Asian-trading.
Because price movements are less volatile, and average hourly moves are smaller – support and resistance has a tendency to hold more consistently. David explains in The Best Time of Day to Trade Forex :
“Most individual Forex traders use ‘range trading’ strategies – buying oversold currencies near support and selling overbought currencies near resistance. These tend to work well during low volatility times, when support and resistance tends to hold.”
How to Trade Ranges During the Asia n Session.
The art of trading ranges very much revolves around prudence.
Traders looking to buy would want to buy when price is ‘cheap,’ preferably when price can be looked at as both ‘cheap’ and close to support.
This support would allow traders to confidently place a stop so that if price continues to respect that range of price – profit on the trade should be realized. A break of that support (and thereby hitting the traders stop) should be somewhat of a surprise. After all, if the trader is expecting support to be broken they should probably be looking to trade breakouts.
Because traders entering in ranges have an element of support underneath buy positions (and resistance above sell positions), traders have a very cogent mannerism of capping their risk in effort to avoid The Number One Mistake that Forex Traders Make .
That mistake (traders losing FAR more when they are wrong than they make when they are right) can be addressed by traders looking to speculate on ranges, by instituting the advice of Quantitative Strategist David Rodriguez from the aforementioned article:
“Traders are right more than 50% of the time, but lose more money on losing trades than they win on winning trades. Traders should use stops and limits to enforce a risk/reward ratio of 1:1 or higher .”
As a matter of fact, we discussed this topic in detail in How to Identify Positive Risk-Reward Ratios with Price Action . In the article, we teach traders to identify swings based on past prices to establish support and resistance. This can allow traders to analyze the potential risk amount along with how much profit potential may exist.
Created by James Stanley.
By identifying price action in this manner, we can clearly delineate that if support were to be broken (i. e., negating the trend), we would want to close out of our long position.
We took this idea a step further in How to Analyze and Trade Ranges with Price Action by teaching traders how to (as the article is titled) analyze these conditions. By simply observing a range-bound chart, traders can use recent price swings to identify these inflection points (as shown below):
Created by James Stanley.
--- Written by James B. Stanley.
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Past performance is no indication of future results.
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Asian Session Range Breakout Forex Trading Strategy.
Phil Newton's forex trading strategy describes how to trade range breakouts during the Asian session.
Currency Pairs: EUR/USD, GBP/USD, USD/CHF and USD/JPY. (you can use on all currency pairs) Time Frame: 15 Min Chart Type: Candlestick chart.
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20 Pips Asian Session Breakout Forex Trading Strategy.
Posted by D 302 days ago.
The 20 pips Asian session breakout Forex trading strategy allows you to trade breakouts upon the the opening of the London trading session.
What is so special about the time when the Asian session dies off and the London session begins that there is a system called Asian session breakout?
In general, the Asian session is a quiet time to trade.
There is no central exchange for Forex so getting the exact volume is difficult. As a proxy, let’s look at the volume for the JPY currency Futures contract.
Asian Session Volume – 2017.
You can see from the dashed green line the volume in the JPY is well below the trading day and often times this is simply price moving in a small range (but not always). You can see the spike in volume once London opens up and that is where we look to get some pips added to our trading account.
It’s during this slow time in the market that we can look to perhaps position for the London open and use our 20 pips a day trading strategy for a quick pop trade. You can visit the Oanda Forex Market hours page here.
20 Pips A Day From These Asian Session Ranges – Jan 2017.
Breakdown of 20 Pips A Day Trading Strategy Using Asian Session Breakouts.
This Forex system is similar to the London breakout forex trading strategy but the only difference here is you are aiming for only 20 pips profit for every single trade you place.
Currency Pairs to Trade: GBPUSD, GBPJPY, EURGBP, EURJPY Forex Indicators: None Time frames: You can use 15, 30 mins or 1 hr time frames.
As discussed earlier, the Forex market during the Asian trading session is usually thin and does not much volume and volatility. Because of this, you will generally tend to see the Asian market in a consolidation (price compression).
But as soon as the London and European Forex market opens, the volatility and the volume increases and this causes price to breakout of the Asian session market consolidation.
This Asian Session Breakout Strategy is designed to capture that breakout.
Refer to this Forex chart below when you go over the rules of this breakout trading strategy. It is the 1 hour chart of the USDJPY currency pair.
Breakdown of 20 Pips A Day Trading Strategy Using Asian Session Breakouts Jan 2017.
TRADING RULES.
The trading rules for the 20 pips Asian trading strategy are really simple:
At least 1 hr before the London market opens, you need to identify the highest high and lowest low of the Asian trading session. You can see that I have done that with the yellow boxes. The ideal situation would be that the Asian session was traveling in a tight range during that day. If the Asian session was in a good trend and not in a consolidation during the day, then if you tried to find the range, it would be too large…which means your stop loss would have to be very large to cater for that wide range! So only target days where you really see tight trading range during the Asian trading session. Place a buy stop and sell stop pending orders at least 2-3 pips on both sides of the consolidation. Some of you may choose to pick a direction depending on the move into the consolidation. The stop loss of the buy stop order should be placed 2-3 pips below… on the other side where the sell stop pending order was placed and the stop loss for the sell stop order should be placed 2-3pips above the highest high of the consolidation…where the buy stop order pending order was placed. Set take profit targets for both pending orders at 20 pips. You can see the 20 pips a day being taken at the yellow lines. Wait for a breakout to happen. When one of the pending orders is activated, then immediately close the other other that has not been activated.
20 Pips A Day Or More? Test This Asian Breakout Strategy Before Using.
Many traders just jump into a trading strategy like the 20 pips a day one without doing any sort of testing. They will ask questions about other currency pairs to use, extended profit targets…etc…but won’t do what needs to be done to answer those questions.
With every trading strategy on this site, you must do your own testing and this Asian session breakout strategy is no different. 20 pips a day over time can make for a nice healthy trading account.
10 Comments.
Does this strategy works only on a Major pair (EU, GU ect)? Or is it applicable to all pairs?
its worth testing out..because when the london market opens, it also means the other major pairs start to move as well so yes, it can be applied to any currency pair that shows the characteristic of breaking out of the Asian session tight range.
does this strategy only when no fundamental news are released on that day?
Just to confirm, is the London open at 8am (U. K time)? and during daylight saving time its 9am?
(1) Its better, I suppose, to use this system when no news are scheduled to be released that day. But if you take a trade and if any news releases are going to be made that day, then maybe take some or all profit or of you move move stop loss to breakeven and see what happens…the news may work in your favour.
(2)yes, london market opens at 8am UK time.
if you don’t know what time london forex market opens in your timezone, refer to this:
okay thanks for the previous reply,
Your Quote on rule number 1 :
“So only target days where you really see tight trading range during the Asian trading session”-
quote. Based on this quote, any good indicator which is reliable so that it can tell you if its ranging or in trend ? Such MACD? RSI? or other tools ?
By observing the range of Asian Session, are you looking at the whole day (hourly chart) time 8am tokyo to 4pm tokyo time or just only the last closing hours of tokyo?
Can the EUR/USD be used here?
you have not replied any of my questions, why is that?
I don’t spend all my time answering questions immediately as I have other things in life to do.
Anyways, you questions and my answers/thoughts:
(1)Based on this quote, any good indicator which is reliable so that it can tell you if its ranging or in trend ? Such MACD? RSI? or other tools ?
Answer: i don’t know of any reliable indicator. Price action gives you much more clarity than any other indicator in my opinion when you want to determine such things.
(2)By observing the range of Asian Session, are you looking at the whole day (hourly chart) time 8am tokyo to 4pm tokyo time or just only the last closing hours of tokyo?
Answer: Refer to rule #1 up there….this is a daily trading system. which means you potentially make only one trade a day IF the conditions are good to trade (tight range).
(3)Can the EUR/USD be used here?
Answer: i think it can work but you need to go back over past data and do a study/analyse to see if it can work.
(4)you have not replied any of my questions, why is that?
Answer: refer to my second sentence on this reply…:)
Thanks for the great help you are giving to traders.
Could you tell us in your own opinion how many pips you will consider too large a range to trade this Asian Break out strategy?
that will be a hard question to answer (because its not going to be the same all the time) but if you have spend a lot more chart time understanding and seeing how the market moves in the different trading sessions (asian, london, us etc) then you will get a “feel” of the asian trading range is like and if its too large for you to take the trade or not.
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