The World's Three Major Markets

There are a number of financial hubs in the world: New York, Frankfurt, Hong Kong, Sydney,etc.

However, three of them clearly stand out as the major exchange centers: London, Tokyo, and New York. Each of these stands as a financial reference point for its part of the world.

But even among these “Big Three” their respective trading volumes differ considerably and, most importantly for us, London has by far the most active Forex market.

Let me throw some figures at you: the volume of Forex transactions processed during London trading hours is typically close to 30% of the world’s total daily volume (or about $580 billion US). New York does a little better than half that, with around 16%$330 billion US). And finally, Tokyo typically sees about 10% ($210 billion US).So if we’re trying to mimic the stock market’s Open Range Breakout strategy into Forex, we need a candidate currency that’s likely to be volatile early in the trading day.
Let’s enter the GBP (Great Britain Pound or Sterling Pound) into the equation.

Typically, this is by far the most volatile major currency. And its main crosses – GBPUSD, GBPJPY, GBPCHF, GBPAUD, GBPCAD and GBPNZD – will routinely pull out larger moves across the board than any other major currency. On any given day, all of the GBP major crosses will usual ly swing across a range of 150 pips and above. Luckily, we only need to be in position to grab a small portion of that range in order to make a healthy profit and grow our trading account.

Remember above, where I told you to bear in mind the differences in time zone and trading volume? This is where we exploit them. We’ve already got our high-volatility currency picked out: the GBP.

Now, beyond volatility, the Sterling Pound has two characteristics associated with trade volume that make it perfect for our system:

1. The Pound is traded at very low volume during the Tokyo session.
2. The Pound is traded at very high volume during the London hours. Indeed, not
surprisingly, it’s where most of the daily trading for this currency is concentrated.So on the one hand we have the volatile Pound contained within a fairly narrow range throughout the Tokyo trading day, but on the other, we have it springing to life as the world’s most active Forex trading market opens.

If you’re following so far, what we’ve got is a small, predetermined range (the Tokyo session), a high likelihood of a breakout move (during London session) and a high-volatility currency (the GBP). Does all that sound familiar? It’s the formula from the Open Range Breakout strategy we mentioned right at the beginning!
Butwith the London Forex Rush system, we have another advantage that other kinds of
Open Range Breakout traders don’t have: the Tokyo and London markets overlap for one
hour between 2 am and 3 am EST.

What that means, practically speaking, is that the London session can bee seen as a sort of “continuation” of the Tokyo session, but with wildly increased volume and volatility. The work of charting the “breakout range” the way the Open Range Breakout traders usually do in the first half hour has been done for us over the entire Tokyo session, so we’re ready to capitalize on the high volume and volatility of the London session’s passion for the Pound.

As the comparatively slow Tokyo session prepares to go to bed, the wild London one is just waking up. At that moment, around 3 am EST, there is significant market acceleration with thousands of transactions and trading orders going through.That market acceleration creates violent swings during the first two hours of the London
market, which continue until the trading frenzy calms down a little bit and things return to normality. We’re looking to leverage that momentum, using the information we have from the day’s trading in Tokyo.

The Open Range Breakout is a strategy borrowed from the intraday stock markets. It seeks to recognize a stock’s likely overall bias for the upcoming trading session by carefully watching for and monitoring its breakout from an early trading range established at the start of the session. The stock – or currency in our case – being tracked needs to be volatile to be useful for this purpose.
So…
1. The Sterling Pound is extremely volatile against other major currencies.
2. The London Forex market has the highest trading volume of all the major Forex
markets, while Tokyo has the lowest.
3. The Sterling pound is hardly traded at all during the Tokyo session, while it is indeed traded heavily during London’s.
4. The Tokyo market gives way to the London market between 2 and 3 am EST. At that
precise time, the Forex markets experiment a rapid acceleration. This factor, combined with the previous three, makes a momentum breakout of the GBP-crosses rather likely.

Those are the four core pillars upon which the London Forex Rush system is built. We will be looking to trade the most volatile currency crosses (meaning GBP-pairs), right as the market goes through its most dynamic, accelerating period (the London market’s first few hours), and we will be using the breakout from the range established during the Tokyo session as the trigger to our positions.