You’ve probably heard the saying, “The early bird catches the worm.” This adage rings true in the world of forex trading, particularly during the Asian session. The Asian session is known for its lower volatility compared to other sessions, but it doesn’t mean that there aren’t opportunities to take advantage of. In fact, with the 20 Pips Asian Session Breakout Forex Trading Strategy, you can take advantage of the price movements that do happen.
20 Pips Asian Session Breakout Forex Trading Strategy
Introducing the 20 Pips Asian Session Breakout Forex Trading Strategy—a powerful system designed to seize the breakout opportunities within the Asian trading range during the London forex trading session.
Although you’ll be trading during the London forex trading session, your focus will be on analyzing the Asian forex trading session. During the overlapping sessions, you can expect higher market activity and volatility as multiple trading times converge. This creates a prime opportunity for traders to take advantage of potential price movements through various trading strategies.
This forex trading strategy shares similarities with the renowned London breakout strategy, with one difference—our target is a modest 20 pips profit per trade. By setting this achievable goal, we can exploit the Asian session’s unique characteristics to our advantage.
Currency Pairs, Forex Indicators, and Timeframes
For this Asian Session Breakout Forex Trading Strategy, we will focus on the following currency pairs: GBPUSD, GBPJPY, EURGBP, and EURJPY. The beauty of this strategy lies in its simplicity—no specific forex indicators are required.
As for the timeframes, you have the flexibility to choose between 15 minutes, 30 minutes, or 1 hour, depending on your trading style and preferences.
Asian Trading Session: Consolidation and Potential Breakouts
If you’ve spent enough time trading in the forex market, you’ll notice that the Asian trading session tends to be relatively thin, characterized by lower volume and volatility. Consequently, the Asian market often finds itself in a state of consolidation, moving within a narrow range.
However, everything changes once the London and European forex markets open. As volatility and volume surge, prices tend to break out of the Asian session’s consolidation phase. It is precisely this breakout opportunity that our Asian Session Breakout Strategy aims to capture.
The trading rules for the 20 pips Asian trading strategy are simple:
- Identify the highest high and lowest low of the Asian trading session at least 1 hour before the London market opens.
- Look for days with a tight trading range during the Asian session.
- Place buy stop and sell stop orders 2-3 pips on both sides of the consolidation.
- Set the stop loss for the buy stop order below the sell stop order, and the stop loss for the sell stop order above the highest high of the consolidation.
- Set a take profit target of 20 pips for both pending orders.
- Wait for a breakout to occur.
- When one of the pending orders is activated, immediately close the other order that has not been activated.
Here is a recent trade setup and trigger:
Asian Session Breakout Strategies
You might think that breakout strategies are too risky, but with proper risk management and analysis techniques, they can be a powerful tool for maximizing profits in the markets. Breakout trading is based on the idea that when price breaks through a significant level of support or resistance, it will continue to move in the same direction. False breakouts can occur, where price briefly moves beyond the level before reversing back into its previous range.
By using entry signals such as candlestick patterns or momentum indicators, traders can increase their chances of catching a true breakout.
Price action and market psychology play important roles in successful breakout trading. Traders must study past price movements to identify key levels of support and resistance that are likely to trigger breakouts. They must also understand how other market participants may react to these levels, as sentiment can shift rapidly during volatile periods.
Implementing effective risk management strategies such as setting stop-loss orders can help limit potential losses if false breakouts do occur. With these tools at your disposal, you can confidently incorporate breakout strategies into your forex trading plan.
Characteristics of Asian Session
The characteristics of the Asian session can greatly impact your trading success, with an average daily range of only 40 – 50 pips during this time. This session is known for its low market behavior and liquidity levels due to the absence of major economic news releases. However, it doesn’t mean that you cannot profit from it.
In fact, some traders prefer trading during this session as it allows them to capitalize on small price movements.
Trading volumes during the Asian session are usually lower than in other sessions, which means that price movements may not be significant enough to generate profits. Therefore, it’s crucial to pay attention to currency correlations and choose pairs that have higher volatility during these hours.
The Asian session starts at 10 PM GMT and ends at 8 AM GMT, making it a convenient time for traders located in Asia or Europe who want to avoid staying up late or waking up early to trade.
Best Asian Session Currencies
You’ll find the most commonly traded currency pairs during the Asian session include USD/JPY, EUR/JPY, AUD/USD, and NZD/USD. The trading hours of Asian markets overlap with those of European markets, resulting in high trading volume and market behavior that is influenced by both regions.
In terms of liquidity levels, the Asian session can be less liquid compared to other sessions due to the absence of major economic releases or news announcements. This can result in lower price movements or volatility for some currency pairs.
It’s important to note that while these currency pairs are popular during Asian trading hours, they may not necessarily be the best options for every trader’s strategy. You should conduct thorough research and analysis before deciding on which currency pair(s) to trade. Traders should consider factors such as their risk tolerance, market conditions, and technical indicators when making their decisions.
Volatility and Opportunities
If you’re looking for opportunities to profit from price movements, keep an eye on how volatile the market is and use technical analysis to find potential entry and exit points. The Asian session breakout forex trading strategy takes advantage of the lack of volatility during this period and is based on identifying key support and resistance levels.
Having a solid understanding of trading psychology and risk management is also crucial when implementing this or any other Forex strategy.
Traders should have a clear plan in place for managing their trades, including stop-loss orders to protect against significant losses. By combining these elements with the Asian session breakout forex trading strategy, traders may be able to identify profitable opportunities in the market.
Frequently Asked Questions
What is an effective forex strategy specifically designed for the Asian session?
A suitable forex strategy for the Asian session involves identifying tight trading ranges, placing buy stop and sell stop orders around the consolidation, setting appropriate stop losses and take profit targets, and waiting for breakouts to occur.
Which forex pairs are recommended for trading during the Asian session?
Common forex pairs traded during the Asian session include USD/JPY, AUD/USD, and NZD/USD, among others. The choice of pairs depends on factors such as liquidity, volatility, and the specific trading opportunities available.
When is the optimal timing to engage in forex trading during the Asian session?
The best time to trade forex during the Asian session is typically during the overlap of the Asian and European sessions, particularly when key economic data releases or news events affecting the Asian markets are anticipated, which can enhance market activity and volatility.
Which currency pair is considered the most favorable for trading during the Tokyo session?
The USD/JPY currency pair is often considered a favorable choice for trading during the Tokyo session due to its high liquidity and responsiveness to Japanese economic data and events, as well as the influence of the Bank of Japan’s monetary policy decisions.
Congratulations! You now have a solid understanding of the Asian Session Breakout Forex Trading Strategy. With its unique characteristics, this trading session offers plenty of opportunities for traders to make profits. However, it is important to keep in mind that market volatility can vary greatly during this time and it’s essential to be aware of any potential news events.
By implementing effective breakout strategies and keeping an eye on overlapping sessions, you can increase your chances of success. Remember to practice good risk management and always stay disciplined with your trades.
As the great Warren Buffett once said, “Risk comes from not knowing what you’re doing.” So keep learning, stay informed, and embark on your trading journey with confidence – just like a skilled sailor navigates through rough seas with ease!
Updated May 2023
Published June 2015