Session-based technical setups: the Asian range and the London open (educational example)

What you will learn

• How to define the Asian range objectively and why the London open can break it.
• A complete, written rule set: filter, entry, stop, target, time exit.
• How to size the position in euros when the account currency differs from the quote currency.
• The main failure modes of the setup and how to test it before using real money.

Explanation

The trading sessions and their liquidity were covered earlier in this course. During the Asian session, pairs such as EUR/USD and GBP/USD often move in a narrow band because European and US participants are not yet active. The Asian range is the high and the low of that period. When London opens, liquidity and order flow increase, and price sometimes leaves the range with momentum. This is the idea behind the setup. It is an educational example, not a recommendation and not a proven edge: you must test it yourself.

Rule set (example)

1. Range window: 00:00–07:00 UK time (01:00–08:00 German time; the UK and Germany switch to summer time on the same dates). Mark the highest high and the lowest low.
2. Filter: trade only if the range width is below 50% of the 14-day Average True Range (ATR, the average daily range, covered in the technical analysis course). A narrow range means volatility is compressed. Skip days with a high-impact event for either currency before 10:00 UK time (central bank decisions, inflation, employment data).
3. Entry: at 07:00 place a buy stop 3 pips above the range high and a sell stop 3 pips below the range low, as an OCO order (one cancels the other). The buffer reduces fills from small spikes.
4. Stop-loss: at the range midpoint. A full return to the middle of the range means the breakout has failed.
5. Target: 1.5 times the risk (1.5R).
6. Time exits: cancel unfilled orders at 10:00 UK time; close any open trade by 16:00 UK time.
7. Risk: 0.5% of the account per trade, including the spread in the stop distance.

Why it can fail

• False breakouts (fakeouts): price breaks one side, triggers stops, and reverses. Some traders deliberately trade this reversal instead; that is a different setup with different rules.
• Spreads at 07:00 UK time can still be wider than during the main session, increasing costs.
• News days produce gaps and slippage that the stop may not contain.
• Changing conditions: a pattern found in past data can stop working. Backtesting and forward-testing rules, including how to avoid look-ahead bias, were covered in the technical analysis course.

Worked example

Hypothetical example: EUR/USD, account €10,000, EUR/USD around 1.10. Swaps and commissions are excluded; a 1-pip spread allowance is included.

1. Asian range: high 1.1030, low 1.1000, width 30 pips. 14-day ATR: 80 pips. 30 ÷ 80 = 37.5%, below 50%, so the filter is passed. No major news before 10:00.
2. Orders: buy stop at 1.1033, sell stop at 1.0997 (OCO).
3. The buy stop fills. Stop at the midpoint 1.1015: 1.1033 − 1.1015 = 18 pips, plus 1 pip spread allowance = 19 pips.
4. Risk budget: 0.5% × €10,000 = €50.
5. Pip value per standard lot: $10 = 10 ÷ 1.10 ≈ €9.09.
6. Size: 50 ÷ (19 × 9.09) ≈ 0.289 lots, rounded down to 0.28 lots. Planned risk: 0.28 × 19 × 9.09 ≈ €48.36.
7. Target: 1.5 × 18 pips = 27 pips above entry, at 1.1060. Potential gain: 0.28 × 27 × 9.09 ≈ €68.73 before costs.

If neither target nor stop is reached by 16:00 UK time, the trade is closed at market, whatever the result.

Common mistake

Practice activity

GBP/USD Asian range: high 1.2740, low 1.2700. 14-day ATR: 100 pips. Account €8,000, risk 0.5%, EUR/USD = 1.10, spread allowance 1.5 pips, buffer 3 pips. Decide whether the filter is passed, then calculate the long entry, stop distance, position size (rounded down to 0.01 lots) and target.

Key takeaways

• Define the Asian range with a fixed time window and filter it against ATR.
• Write every rule in advance: entry buffer, midpoint stop, 1.5R target and time exits.
• Size in euros by converting the pip value and including the spread in the stop distance.
• False breakouts, news and changing conditions mean the setup must be tested, not trusted.

Next step

In the final lesson you will combine everything from this course into your written forex trading plan and a weekly review routine.