Forex Trading Education For The London Open

May 5, 2009

by Michael Jones

As part of your Forex trading education, you need to examine and understand the effect market timings can have on trading flow.

Around the time of the London open there is much market activity and you can be presented with good trading opportunities.

Around London open time develop recognition skills and add them to your Forex trading education so you can capitalize on this productive market session.

The following questionnaire and checklist will help.

London Open Preparation

Browse your charts about 15 to 30 minutes before the London market opens and use these questions as a guide:

Are the MACD indicators on the 4 hour and 1 hour charts in agreement? If they are not going in the same direction be very careful!

Is there MACD divergence on the 4 hour, 1 hour, or 15 minute chart? Look for other clues to confirm that price may go in the direction of MACD divergence.

Looking at the four hour chart, ask yourself, what is the overall trend?

Use your Fibonacci tool on the last swing high or low and see if price is approaching a key level, either a retracement or an extension.

Look to see where price is in relation to the 200 Exponential Moving Average (EMA) on the 4 hour, 1 hour and 15 minute charts. If price is above the 200 EMA on the 15 minute chart but below it on the 4 hour and 1 hour charts, then price is bucking the trend and you can expect it to go the other way at some point. (The opposite will be true if price is below the 200 EMA on the 15 minute chart but above it on the higher time frames.)

Are any Economic Reports imminent?

As the candle closes on the 15 minute chart at London open, do you see any distinctive candle patterns such as tweezers, or doji’s or hammers indicating price exhaustion?

If I entered a trade right now in a particular direction, what would be the risk and where would I place my stop?

After waiting a few minutes from the time London opens, and you see a number of converging factors based on the analysis points given above, decide whether you are going to enter the market. Either:

trade

wait for clearer signals or a better entry point

Increase your Forex education by carrying out this kind of analysis around the time of the London open.

You will be able to fine tune your analytical skills and be in touch with the underlying feel of the market.

Forex trading education does not depend on a magical formula. What it does entail is years of work, study, practice and experience, often hard earned through watching many trades go bad.

Eventually the newer trader learns mental discipline, and how to control the emotions – probably the biggest part of a Forex trading education.

Practising a set procedure like the one above, while laborious to start with, will help the newer trader make fast progress toward the day when consistent profits are made on a regular basis.

About the Author:

For a free candle & chart pattern recognition reference tool click here: Candle Chart Tutorial See how to use trendlines to get an optimum trade entry point: Trendline Break