Forex London/New York Overlap Trade

Entry Logic

• Entry triggers on a pullback to the 50 EMA on the 15-minute chart during the London/New York overlap (12:00-16:00 GMT).
• Confirmation requires a bullish or bearish engulfing candle.
• Timeframe is the 15-minute chart.
• Location is a pullback to a key moving average during the most liquid time of day.
• Market condition must be a trending market.

Exit Logic

• Profit target is the session high for a long, or the session low for a short.
• No scaling out.
• Trailing stop is a 20-pip trailing stop.
• Exit on signal failure if the price closes on the wrong side of the 50 EMA.
• Exit on an opposite signal from an engulfing candle in the opposite direction.
• Exit on time expiration at the end of the New York session (21:00 GMT).
• Exit on momentum loss if the RSI (14) crosses below 50 for a long, or above 50 for a short.

Stop Loss Structure

• Hard stop is placed 15 pips below the low of the entry candle for a long, or 15 pips above the high for a short.
• No soft stop is used.
• Maximum dollar loss is 0.9% of account equity.
• Maximum percent loss is 0.9% of account equity.
• Structural stop is placed below the most recent swing low/high.

Risk Management Framework

• Risk per trade is 0.45% of the account.
• Maximum daily loss limit is 1.8% of the account.
• Maximum weekly loss limit is 5% of the account.
• Maximum drawdown allowed is 15%.
• Risk-reward ratio requirement is a minimum of 1:1.5.

Position Sizing Model

• Sizing is based on a fixed fractional model (0.45% of account per trade).
• No volatility adjustment is used.
• Conviction sizing is not used.
• No scaling in.
• No scaling out.

Trade Filtering

• Avoid trading during major news releases.
• Requires a clear trend on the 1-hour chart.
• Instrument can be any major forex pair.
• Trade only during the London/New York overlap (12:00-16:00 GMT).
• Avoid trading in ranging markets.

Context Framework

• Trend direction is determined by the 1-hour chart.
• Price should be on the correct side of the VWAP.
• Price should be on the correct side of the 200 EMA on the 1-hour chart.
• Location is a pullback to the 50 EMA.
• Higher timeframe (4-hour) should be in a clear trend.

Trade Management Rules

• Move stop to breakeven after the price has moved 1R in your favor.
• No scaling out.
• Do not add to the position.
• Let the trailing stop manage the trade.

Time Rules

• Optimal trading window is from 13:00 to 15:00 GMT.
• Avoid trading outside the overlap period.
• This is the most liquid and volatile time of the trading day.

Setup Classification

• A+ setup: Pullback to the 50 EMA in a strong trend with high volume.
• A setup: Pullback to the 50 EMA in a moderate trend.
• B setup: Pullback to the 100 EMA.
• C setup: Trading against the trend.

Market Selection Criteria

• Instrument can be any major forex pair.
• Requires high liquidity and volume.
• Volatility should be moderate to high.

Statistical Edge Metrics

• Expected win rate is 50%.
• Average win is 2R.
• Average loss is 1R.
• Profit factor is 2.0.
• Expectancy per trade is +0.5R.

Failure Conditions

• Strategy fails in ranging markets.
• Avoid trading when the 1-hour and 4-hour charts are in conflict.

Psychological Rules

• Be patient and wait for the pullback to the 50 EMA.
• Do not force trades when there is no clear trend.

Advanced Components

• A trend filter (e.g., ADX) can be used to confirm the trend.
• No volatility or correlation filters are used.
• Multi-timeframe alignment with the 1-hour and 4-hour charts is essential.

Location

• Strongest during the middle of the London/New York overlap.
• Weakest at the beginning and end of the overlap.
• The presence of a clear trend is the most important factor.