European Open Trading Strategy

The European Open Forex strategy is a popular trading method. It can be used to capture early momentum based moves at the first opening of the currency markets.

The strategy coincides with the the first opening of the major European financial centres. This is a time of day when markets tend to see heightened volatility and frequently establish their directional trends for the day ahead. The aim is to identify sudden surges in price action and book some pips before the momentum fades.

This concept behind this is very similar to that used to trade the London open. Indeed this variation makes use of the same principles, but simply changes the trading time to align with the core European markets rather than the London financial centre.

As a result it is complementary, providing additional trading opportunities for the early riser and a change to book some additional profits.

European Breakout Strategy

The core of the Euro Forex strategy relies upon identifying established points of support and resistance that could be breached in the early morning momentum. The aim is to capture any breakouts of price action that occur beyond these levels. If these moves occur in the first few minutes of the market open they are likely to see greater momentum give greater potential for profit.

The opening of the financial centers in London and on mainland Europe are often blurred. London tends to overshadow the smaller financial centres of the continent due to the sheer size and volume of deals that are put through its desks. However while key European markets such as Zurich, Frankfurt, Paris and Amsterdam may not be top 10 on the Global Financial Centres Index they nevertheless exhibit sufficient volume to offer good trading potential.

The spikes in volume and liquidity that occur when they first open offer plenty of potential for the breakout Forex trader.

European Open and London Differences

The key differences between setting up a European Open strategy and one focusing exclusively on the London Open comes from the time of execution. The main markets in Europe observe CET (Central European time) which is one hour ahead of GMT (Greenwich Meantime Time) as used in the UK. Consequently this sees the continental markets open for business 1 hour prior to those of London. Note that both regions mark summertime by putting their clocks forward one hour which maintains the differential between the two time zones.

The disparity in opening times between these two markets makes it possible to target two potential breakout opportunities. Alternatively a strategy can be built entirely around this earlier openign time.

Trading ranges prior to this session such as the Asian Zone recent market highs or lows, box breakouts or  even moves above or below the daily pivot can all be used as signals for entering a trade.

What To Trade?

If you are looking to profit from a strategy at the European Open then  it is important to identify the key currency pairs to trade.

Trading at this time of day tends to be best suited to Euro based pairs and Swiss Franc crosses. These tend to exhibit strong early moves in tandem with the opening of the major European and Zurich financial markets.

Another good candidate is the British Pound. Crosses of this currency offer a riskier trade at this time of day due to the limited time before the London market opens. Often trading on the Pound is best left until the London Open when volatility peaks.

The key benefit of trading at this time is that entry points and risk levels can be clearly defined prior to trading. The European Open trading strategy allows a mechanical system to be executed which helps to keep a handle on risk control. It also makes for a very time efficient way of trading at a set point of the day.