London Opening Range Breakout

tomorton

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Also noted two personal errors in the mid-week -
1. when geo-political events hand over an unexpected windfall, this outcome is outside the normal strategy, so forget the rules, just take it and bank it

2. avoid the temptation to be selective over which pair from a base currency set to trade - its a dumb system and data for filtering targets is not there yet, so set orders on them all and take them all.
 

new_trader

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* but what about USD, commodity and US index trades? - would they be better run as NY market ORBO's rather than London?
I used the cash market timezone of the instrument I was trading when I tested my system. The e-mini S&P500 trades almost 24hrs M-F but I used the cash S&P500 open times.
 
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tomorton

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An easy statistical conclusion from last week -
of the 14 secondary (reversal) trades which opened after 1300, 12 hit their SL
 

trendie

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An easy statistical conclusion from last week -
of the 14 secondary (reversal) trades which opened after 1300, 12 hit their SL
Isnt the 1300 time really close to the US Opening Range, and the behaviour is now closer to USs actions than Londons?

Good thread, by the way. I think being aware of each session behaviours / tendencies is useful.
 

tomorton

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Isnt the 1300 time really close to the US Opening Range, and the behaviour is now closer to USs actions than Londons?

Good thread, by the way. I think being aware of each session behaviours / tendencies is useful.

Yes, and even more so than usual as currently New York is on Eastern Daylight Time and only 4 hours behind London. London time advances on 31/03.

The London ORBO should still be valid principle for forex as the volume increase when London opens is much more significant than the volume increase when NY opens.

My US index trades were a mixed bag across the week, slightly winning in £ but no strong conclusions possible after just one week.
 

tomorton

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Over the last few weeks I can certainly say that the primary break-out trades based on the London open in the forex market have been a disaster. These have been trades based on a break-out from the high or low of the 0700-0800 range. The limits of this range are almost always broken within the first 15 minutes of LSE trading. But in only very few occasions recently has price then continued to travel to a distance equal to the 0700-0800 range before pulling back into the range and exiting through the opposite extreme.

This is contrary to what I've seen in the past and to so much I've read about ORBO's. So what's going on, why and what can be done about it?

Last question first, what to do? - I'm not taking primary entry signals right now, just the reversal signals for when the break-out fails.

First question - what's going on? - On a longer time-frame the forex market is blocked. Prices are neither rising nor falling with any energy. This sounds counter-intuitive and strictly speaking impossible, price moves every second on all the major pairs, right? Yes, price moves, but it isn't travelling. Of the 28 major forex pairs, only a handful have their most recent weekly bar which overlaps fewer than the previous 4 weekly bars. Most of the charts with the smallest overlaps are GBP pairs. Almost everything else is stuck in a range where it was 2 or 3 months back. On a micro-scale, this will not have been missed by the players who could move price at the open: buying big this morning will lead to nothing, so why take the risk?

Why this happening? - No idea.
 

barjon

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Don’t trade forex (too frantic for me) but I’ve always been confused by the “official” London session hours: IG say 7am open, investopedia says 7.30am (7am elsewhere in Europe) and others talk of 8am.

I suppose the logic of the ORBO is that the opening range is not only influenced by what’s happened out of London hours but also by absorbing overnight orders. Once all this has settled down the “true” direction emerges. Maybe tinkering with what hour (or more) you use will allow the overnight dust to settle if it’s that causing the problem.
 

Bloodhound

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I hope you don't mind me butting in but I trade FX intraday and I have a few thoughts on the problem you're encountering which may, or more likely, may not help. I don't have any empirical evidence to back up any of the following; it's purely based on years of chart watching.

1. FX seems to have periods when Europe is pushing price around and periods when the US seems to dominate. I have no idea why, but that just seems to be how things go. Certainly of late the US has been the 'better' session for me to trade. By better I am mean more fluid and more based around solid technicals. This might affect how London Open breakouts work?
2. Brexit. Quite frankly the constant news flow is completely messing up certain pairs. It's worth noting that a lot of whipsaws and spikes etc. seem to occur around the time of the London Open. Why? Because this is when various ministers are being interviewed on things like Radio 4 etc. The ongoing rumour mill throughout every day doesn't help either.
3. Daylight Savings Time. I don't know why but the markets always seem to be a bit 'off' when we have the crossover between US and UK DST. As an example, I generally never look to enter a new position after around 3-3.30pm and after the London Close is generally dead for me but lately I've been seeing great trades at 6pm when things should have completely died.
4. FOMC. Aside from the ongoing Brexit shenanigans this week been a wait and see week until last night's FOMC which has made for some pretty poor PA a lot of the time.

I do trade range breakouts although not the type of ranges that I think you are looking for but I have seen very few that have been of interest lately.

One last thing I should also mention is that trading on or just after the London Open has always been a complete no-no for me as this is generally the time of day when one is most likely to see great technical setups fail due to issues such as poor liquidity / patchy PA. Maybe it's worth waiting until 10-15 minutes after the open before setting orders? This might be something you have already looked at in which case apologies but I haven't had time to read the whole thread.
 

tomorton

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Terrific input thanks Bloodhound.

To respond quickly to your points in order -

1. Yes, I might need to look at the US open as a possible starting point for trades. Or at least some trades on some pairs / US indices / commodities.

2. Brexit's a real spanner in the works. I'm even wondering whether the uncertainty is depressing trading activity on non-GBP and non-EUR pairs.

3. Yes possibly. I appreciate as far as relating London to NY timings is concerned we're in an unusual interim period.

4. Its like the Fed sets the tempo and the orchestra plays its own tune but always to the Fed's rhythm.

As far as delaying past the London open is concerned, yes, that is in effect what I'm having to do by focusing on reversal patterns rather than the initial break-outs. A bit of a let-down but there's no point doing experimental work if you don't follow the results.

At the end of this exercise, I'd be disappointed if trying to get into day-trading forces me to continuous screen-watching for optimum patterns at random moments. I'm forced to believe there will be time patterns through the day and the respective opens seem a good starting point. But I'm not married to ORBO's, I'm willing to follow where this leads.

Onwards and upwards.
(or downwards...)
 

Bloodhound

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I'd be happy to give some pointers regarding the breakouts I trade but I'm afraid they definitely fall into your 'optimum patterns at random moments' category. They're nothing special either - just simple wedges but I might trade them differently to how you will normally see them traded.

That said, depending on which timeframes you look at and how many markets etc. they can usually be prepared well in advance and a fair few probably setup overnight.

Obviously I don't in any way want to detract from what you are doing here which is probably more of a mechanical approach than I am used to.
 
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tomorton

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Actually, the more I look at the long-term forex charts, the more I'm thinking Brexit is the issue that has depressed everything.

Looking at the weekly charts for the last 3 months, last week's bar overlaps with multiple previous weeks on most of the 28 major pair charts. Only AUD/NZD had just 2 weekly bars overlapped, though previously it had been 5 and it has now gone to 3. Five charts show an overlap of 4 weekly bars: these are 3 GBP, 1 EUR, plus EUR/GBP. All the rest have generally 9 or 10 weekly bars overlapped, up to 13 plus. This is very unusual.

Considering the combined size of GBP + EUR, does it not seem possible that the forex market institutions are simply holding money back until Brexit clarity?
 

tomorton

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I confess I hope it is Brexit which has made my London ORBO trials so difficult - Brexit is a once in a lifetime event. For better or for worse, this disruption will end normal trading should soon resume.
 

Bloodhound

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Just a thought but have you considered trading less markets by sticking to the most liquid pairs? By this I mean all the majors plus, maybe, the yens too. Due to their lack of liquidity and also their makeup, the crosses / exotics are always going to be choppier which might lead to false signals etc. I don't trade them myself but I would have thought that indices and commodities might be a tough call too unless your BO strategy is aligned to pit hours / exchange opens etc. If there's one thing that trading has taught me is that 9 times out of 10, less is more. This might also help with margin issues and also allow more time to place orders.

On the subject of entering orders quickly, which I guess is a pre-requisite for your strategy, are you using an order entry system / manager to quickly place orders? Easy Order might be ideal for your purposes.
 

tomorton

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Yes, my aim is to steadily eliminate the least productive and focus on the best "responders" to this strategy, but I'm not going to say at this stage that will be the most liquid pairs/markets. The results data will drove the filtering.

I've never heard of Easy Order. Thanks, I'll look it up.

Setting and adjusting orders with this strategy is a real obstacle. For primary trades, two orders are needed per target, all set asap at 0800. This makes for a frantic opening period. When one primary is triggered the other needs to be either cancelled or left to work as a secondary reversal if the B/O fails. Right now I'm just taking secondaries but am sliding the untriggered secondaries up/down the chart as each H1 bar of the B/O completes: their SL and TP and position size have to be adjusted accordingly, so it represents a raft of work through the day.
 

Bloodhound

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You should be able to get hold of a copy of Easy Order from Forex Factory. It's a simple EA which will auto position size based on %age risk against account size. The only thing to watch out for is that the original code was written for USD denominated accounts but someone wrote a fix for GBP and EUR accounts which you should be able to find there. I don't use it myself as I have something a bit more complex but it works well. I'll see if anyone that I know has a copy of the GBP version (assuming that's your base currency) and post it here if they do.