In today forex faq, we have a question from one of our readers.
Below is the question:
Is there a safe and specific way of trading when a major market like London opens. What are important things to be observed to know which way the market will move. Many thanks
When we talk about the London open session, it is considered as one of the important forex trading hours as it is usually around this time where the price will make a big movement.
As a trader, we usually like to trade at this time of big movement as it is when we are able to hit our target profit easily. Similarly it is a double edge sword if you do not know how to trade at this time. You will also be stopped out very quickly.
Therefore you must do some proper technical analysis before you trade the London Open session so that you can increase your odds of winning. I am not saying that you will win all the time after you have done a proper technical analysis as the market at times are pretty unpredictable.
Below are what I will suggest you to look for before the London session
Support and Resistance – This is one of the most important thing that all traders must know. If you are able to identify area of strong support or resistance, you will have identified area where the price will get repelled if it manages to hit it.
You should draw the Fibonacci and Pivot level on your chart to see where are the levels of support and resistance. If there are areas where the Fibonacci and the pivot coincide, it will be considered as area of strong support or resistance.
When the price hits that level, you will know that it will more likely be repelled by it.
Candlestick Pattern – The next thing you can look out for is candlestick pattern. The best pattern you can look for is reversal candlestick pattern like the railway track or the hammer.
If you see these reversal candlestick patterns when the price hits the major resistance or support, the price will most probably be repelled by the level.
Trend Line Break – If there is another tool that you must add in to help you confirm an entry during the London Open session, it must be trend line.
Most of the traders enter their trade based on trend line break as it is a form of support and resistance as well. Whenever you have a valid trend line break, you will find that the price will usually move quite a distance. However you must be careful when using trend line as there are occurrence of fake outs.
These are faking movement that looks like a trend line break but later reverses against you. For those of you who has purchased my forex trend line strategy book, you will already know how to identify and prevent fake outs.
When trading the London Session, you can make use of the above information to help you decided which direction to go. I hope that I have given you a direction to go and if you guys who are reading this post have anything to share, do feel free to give your comment below.