The London box breakout forex trading strategy is a trading system which uses the customized box breakout indicator to capture price breaks during the London session.
MetaTrader4 Indicators used are:
- Box Breakout.ex4 (default setting)
- Fisher.ex4 indicator (displayed as FX-Fish Mod.) (period set to 10)
Preferred Time Frame(s): M15, M30, H1, H4
Recommended Trading Sessions: London (optional: New York session)
Currency Pairs: any
The strategy is designed to trade the price break of the box drawn by the Box_breakout.ex4 indicator on the price chart, confirmed by a corresponding signal on the FX-Fish Mod (fisher.ex4) indicator. These setups are described below.
Buy & Sell Trade Examples (click the image for full size):
Long Trade Entry Rules
A long entry is sought when the price breaks above the pink box traced by the Box_Breakout.ex4 indicator. Confirmation occurs when the FX-Fish indicator is green or has crossed from negative to positive.
A long position is initiated when the following indicator pattern is displayed on the chart:
- Price has broken out of the upper border of the pink box on the chart. A breakout here is defined by price moving above the pink box and closing above it.
- The FX-Fish indicator is green, or has just crossed from negative to positive.
Stop Loss for Long Entry:
Stop loss should be set to ≥ 7-30 pips below the entry price.
Exit Strategy/Take Profit for Long Entry:
The following parameters should be noted in setting the exit strategy for the trade.
- A change in the color of the FX-Fish indicator indicates a trend reversal. Therefore, this can be used to set the TP level on the chart as shown in the BUY trade example.
- Also, when the Fx-Fish indicator bars have started to head towards the zero point, this is a signal to exit the trade.
Short Trade Entry Rules
Short entry with this strategy is based on price breaking out of the lower border of the pink box traced by the Box_breakout.ex4 indicator on the price chart.
- When this downside break occurs, check to see if the FX-Fish mod indicator bars are red in colour or FX-Fish mod indicator has gone from positive to negative as seen on the chart.
Stop Loss for Sell Entry: ≥ 7-30 pips above the entry price.
Exit Strategy/Take Profit for Sell Entry:
The exit strategy on a position(s) is triggered when:
- FX-Fish indicator bars turn green in color or:
- FX-Fish mod indicator has gone from negative to positive, signifying a change in trend.
About The Trading Indicators
The two indicators used for this strategy are custom Metatrader 4 indicators. They work by identifying breakout points (used for trade entries) as well as price reversal areas (used for trade exits).
The key component of the strategy is being able to detect the breakout, defined as price candle going above the box and closing above it, or going below the box and closing below it.
If price merely heads above or below the box without closing above or below the box, then this is a fakeout. This situation cannot be used for trading.