Asian range breakout on GBP/USD: losing even before costs

The rules tested

The strategy buys GBP/USD when the price closes above the range formed from midnight to 7 a.m. London time, and sells when it closes below it. At most one entry a day, between 7 a.m. and 4 p.m. Stop loss at 1.5 ATR, take profit at 3 ATR, 1% of the account at risk per trade, on 1-hour bars.

Instrument

GBP/USD

Timeframe

1 hour (H1)

Entry

first hourly close outside the range formed from midnight to 7 a.m. London time, between 7 a.m. and 4 p.m.; at most one entry a day

Filters

none

Stop loss

1.5 times the 14-bar ATR

Take profit

3 times the 14-bar ATR

Other exits

none

Risk per trade

1% of the virtual account, position size set from the stop distance

Costs

spread actually recorded hour by hour, slippage of half a spread on every stop, no commission; swaps not included

Period tested

from August 1, 2022 to September 25, 2026

Edit this strategy in the lab

The button opens the lab with exactly these settings: change one, run it again and compare.

The textbook rule

During the Asian session, from midnight to 7 a.m. London time, GBP/USD often trades in a narrow range. The idea is to wait for the London open and follow the first move out of that range: buy if an hourly close breaks above its high, sell if one breaks below its low, between 7 a.m. and 4 p.m., at most once a day. Stop loss at 1.5 times the hourly ATR, take profit at twice that distance.

A loss that exists before costs

Without spread or slippage, the rule already loses 34.4%: each trade loses 0.034 R on average before any charges. So there is no edge for costs to wipe out; they deepen a loss that is already there. And they weigh heavily, 0.10 R per trade on average, because the hourly ATR is still modest at the London open: the stop is often only around twenty pips, and the spread takes a noticeable share of it.

Almost a trade a day, fewer than one in three winning

The rule trades almost every business day: 974 trades over the period. With a target twice the stop distance, it would need to win a little more than one trade in three just to cover its costs; it wins only 29.7%. The worst run is 30 losses in a row, and the maximum drawdown reaches 81.2% of the virtual account: at 1% risk per trade, that is what an idea without an edge costs when it trades every day.

Consistent in failure

The loss is not one bad year, even though 2023 weighs heavily (-94.7 R). The design period loses 68.9%, the out-of-sample period 24.3%, and no stop size from 0.8 to 3 times the ATR escapes it: from -54.7% to -95.5%. Longs and shorts both lose, -36.7% and -62.8%.

The usual variations do not change the verdict over this period. With a trend filter (200-bar simple average), the rule trades less and turns barely positive before costs (+4.1%), but still loses 46.8% once costs are paid. On the lab's other instruments, the original version makes -66.7% on EUR/USD, -57.0% on USD/JPY and -24.5% on gold (XAUUSD).

None of this means an Asian range breakout can never work anywhere. It means that in its textbook form, over these four years, it had nothing to capture, and that its trading frequency turns that missing edge into a heavy loss. It is the kind of rule a robot sold as a “London strategy” can automate without adding anything to it; our article on whether forex trading robots actually work covers what to check before believing one. To test your own variations, open this strategy in the lab.

Design period against out-of-sample

Tune the strategy while looking at the design period, then judge it on the out-of-sample period, which played no part in the tuning. A wide gap between the two often means the settings were fitted to the past.

Sensitivity of the main setting

Year by year

In R, the multiple of the risk taken on each trade: a yearly total cannot be read as a % of the account, since gains and losses compound from one year to the next.