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The Big Ben Strategy

February 8, 2007

The Big Ben Strategy Big Ben is a currency-specific trading strategy designed to captured the first direction al intraday move that often occurs within the first few hours after the Frankfurt/London market openings which begin at approximately 1 am EST or 13.00 WIB.

The strategy woks best with the British pound/U.S dollar (GBP/USD) rate. Because this currency rate trades lightly outside London trading hours, the surge in trading every morning in the U.K gives it a “real” market opening, which the strategy looks to exploit. Figure 1 shows pound/dollar trading is virtually non-existent during Asian trading hours. When London opens, however, the pound/dollar accounts for nearly one-quarter of all forex trading. Currency rates with more continuous, 24-hour trading will have les of a distinct open/close as they pass through the different money centers. For example, the dollar/yen rate (USD/JPY), which dominates forex activity during Asian trading hours (78 percent of volume), still accounts for 17 percent of trading during European hours. Before explaining the specific logic behind the methodology let’s take a look at what needs to occur for a trade to set up.

The Logic As mentioned. The pound / dollar rate tends to have lower trading volume outside European / London trading hours because the majority of GBP/USD spot deals are worked through U.K and European dealers. This gives the European/British interbank community tremendous insight into the currency pair’s actual supply demand picture.Forex Trading market share The Big Ben trade sets up when interbank dealing desks use this intelligence to trigger stops on both sides of market, resulting in new intraday highs and lows. Once these orders are cleared from the books, the market is primed for its first real directional move of the day, which is what the strategy is designed to capture.

The logic behind this trade should be similar with many range breakout strategy used to capitalize on the first real move of the day like our daily20pip strategy with forex signal generator working method with daily pivot calculation.

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The rules The following rules are for short traders, but the strategy can be reserved to trade on the long side.
1. The pair makes a new range at least 20 to 25 pips above or bellow the opening price after the early Frankfurt/London trading in the GBP/USD rate begins around 1 am EST.
2. The pair then reverses and trade 20 to 25 pips or more above or bellow the opening price.
3. The pair the reverse once again to trade back bellow the intraday low established in step 1.
4. Sell a breakout (at least seven pips) bellow the London low.
5. Once filled, place an initial protective stop about 30 to 40 pips above or bellow the entry price.
6. After the market moves lower by the distance between the entry price and stop, cover half the position and trail a stop on the remainder.

These simple rules position you to profit from common behaviour that can occur in the pound / dollar when the London / European markets opens.

Trade examples Figures 2 shows a Big Ben trade idea on a five minute chart. The first vertical line marks midnight EST. The second vertical line denotes the Frankfurt open and the third line shows when London players begin entering the market.Forex Trading big ben strategy When Frankfurt market opened, the pound / dollar first moved lower, taking out any nearby sell stops. Within 15 minutes of London entering the picture.

However, the market reversed to the upside. The pair was now free to make the first real directional move of the day, and it fell 90 “pips” before buyers stepped in.

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Figure 3 illustrates a variation of the Big Ben strategy that commonly occurs when there is an abnormally wide opening range. In this case, the pound traded up 26 pips after the London open to 18583, establishing the to of its range. It then came under pressure and sold off 65 pips to make a low of 1.8518 (horizontal line). Next, the currency trader up 50 pips before reversing and plunging bellow the former low In this case, a trader could still justify entering a position, since the basic principles behind the trade were still present.

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The Big Ben Currency day-trading strategy allows you Forex Trading big ben strategy to limit initial risk and captured good moves early in the London trading session. The simple strategy of watching the currency markets, the approach is based on the workings of the global forex market and attempts to exploits its structure. Now you know why London market is the biggest one, and don't forget to start pick this advantage may the pip be with you from you friend at far far away.

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