One of the more popular, or better known, trading strategies in Forex circles is “Big Ben” method. This strategy is named after the famed London landmark for two reasons- it is specifically targeting British Pound, in the GBP-USD pair, and is designed to be used after London opens for business.
It is a day trading technique and entirely technical, disregarding any fundamental input. The cornerstone of the strategy is in fact that trading volume in GBP-USD expands dramatically after the London opening, typically causing relatively large moves, by comparison to preceding swings.
Variants of the Big Ben strategy
Many variants of the Big Ben strategy have been developed, but the core is something like this: initial moves when after Frankfurt opens (an hour before London) establishes daily opening range for GBP-USD. Within the next hour, as the volume grows, the real first move of the day starts, going through high/low of the Frankfurt swing. Purists of the method would look for a move in the opposite direction, reversal, using mostly 5M charts. Stops are typically tight and relative to the returns sought. For example, some variations of the technique suggest targeting 20 pips, while others would make it dependent on the total range of the previous hourly range. Many combinations are possible, but once chosen, specific one should be traded for some time (50,100, more?) trades in a disciplined, systematic manner.
It is not my intention to dive into specific GBP-USD Big Ben strategy- the subject has been analyzed to death, and beyond, in countless articles over the years. What is often overlooked, however, is the fact that many other currency pairs also experience an increase in activity at that time. Euro, Swiss Franc, and their respective crosses tend to behave similarly to GBP-USD, by staging large moves after London opens. There is nothing shocking about it. Bulk of trading in most currencies is done during domestic business hours. Interestingly, though, other, less obvious currency pairs also start moving during this time. One of them is USD-CAD.
Principles of Big Ben method for USD-CAD
The hourly chart USD-CAD during the period from 10.07 to 10.23 last year was chosen at random. It indicates a candle for the hour before London opens. Almost every day there is an increase in activity in the following hour, in most cases, it is a reversal, candle of the opposite color. A few hours later there is another spur of activity when North America opens for business. All said the vast majority of entire daily ranges happen during the 8 hours after trading starts in London.
Trying to take advantage of this almost daily occurrence, by counting on the move that lasts for this period of time. It is longer than typical Big Ben set up, but the principles are the same. Simple breakout orders, with fixed 40 pips stop, but no target values. Trades, if not stopped out, are always close at 11:00 EST, regardless of loss or profit at the time. In fact, the whole process is automated and is repeated daily without my interference.
The Big Ben strategy is applicable to much more than just GBP-USD. The London opening is pivotal during Forex trading day, influencing almost all active currency pairs, even USD-CAD. Anybody who trades Canadian Dollar with some frequency should get familiar with its behavior in early European action. CAD is considered difficult to trade, so any edge is welcome. Principles of Big Ben method, while simple, are also flexible. One can easily create a unique, robust system using it as a framework.