I've been trading XAUUSD for ten years, and the London open session is what I know best. In my early years, I believed that "the London open always brings big moves," but I kept getting slapped by fake breakouts. Over time, I gradually changed my approach. Now I only trade filtered breakouts. The win rate isn't high, but the risk-reward ratio is decent. Below is my real approach—no guarantee of profits, just my own trading journal.
The Asian Session High/Low Is the Key
I start watching the market at 6 AM Beijing time every day and first draw the Asian session range. From 6 AM to 3 PM (before the London open), I take the highest and lowest points. This range can't be too wide. If it exceeds 8 dollars, I skip it because the stop loss required for the breakout would be too large and not worth it. For example, yesterday the Asian session high was at 2328 and the low at 2320, an 8-dollar range, right at the edge. I hesitated but still took the trade.
When London opens (15:00 Beijing time), I see which way the price breaks. I only take the first breakout, and it must have a 5-minute close outside the range. If it's just a wick that pokes through and closes back, I don't chase it. Last month, there was a time when the price surged to 2330, but the 5-minute close was at 2329, not holding, so I gave up. Sure enough, it later fell back into the range.
Stop Loss and Position Sizing: Fixed Amount, Not Fixed Points
I place my stop loss on the other side of the range in the breakout direction, plus a 1.5-dollar buffer. For example, if going long and the breakout is at 2328, I place the stop loss at 2318 (Asian session low of 2320 minus 2 dollars). The stop distance is 10 dollars, which is a bit large, so I reduce my position to 0.5 lots. My account is 20,000 dollars, and I control single-trade risk to within 2%. A 10-dollar stop corresponds to 0.4 lots. I round up to 0.5 lots, slightly exceeding the risk, but it's acceptable.
I take profits in two batches: the first target is 1:1, i.e., 10 dollars, and I close half; then I move the stop loss to breakeven and see if it can reach 1:2. Most of the time, I only hit the first target, but occasionally a trend can run 30 dollars. I'm not greedy—once it hits 1:1, I take some off the table.
Filtering Fake Breakouts: Watch ATR and the Previous Day's Close
I've stepped on too many landmines with fake breakouts. Later, I added two filters: first, the body of the 5-minute candle that breaks out must be greater than 1.5 times the previous candle, otherwise I don't follow; second, if the previous day's close is inside the Asian session range, the breakout success rate is lower, so I halve my position. Also, I don't use moving averages, only price action. Once, after the price broke out, it immediately pulled back to the upper edge of the range. I waited for a second close to confirm before entering. Although the entry price was a bit worse, I avoided a fake breakout.
Also, if there's important data before the London open (like UK CPI), I skip it entirely and don't gamble on the data.
My Daily Execution
I only trade once a day, at most twice. If the first trade gets stopped out, the second breakout requires stricter confirmation (like a 15-minute close), otherwise I call it a day. I record every trade and review at the end of the month. In the last three months, I took 22 London breakouts in total: 11 wins, 9 losses, and 2 breakeven. Win rate 50%, average win 12 dollars, average loss 8 dollars, risk-reward ratio 1.5. Total profit isn't much, but at least no big losses.
This strategy isn't magical; it's just experience I bought with my own losses. The core of the XAUUSD London open breakout is filtering out fake signals, not chasing every big move. If you want to try it, first run it on a demo account for three months to see if you can execute it strictly.
Final reminder: any strategy has times when it fails. Last month, I got stopped out by fake breakouts three days in a row and almost wanted to give up. Later, I reduced my position size and got through it. Trading is a long run—don't treat one breakout as everything.