Key results
- Total return
- -28%
- Buy & hold: +0.1%
- Annual return (CAGR)
- -3.2%
- Buy & hold: 0%
- Max drawdown
- -31.4%
- Buy & hold: -24%
- Win rate
- 36.26%
- Profit factor
- 0.87
- Trades
- 1,230
- Longest losing streak
- 15 trades
- Period
- Oct 2, 2016 to Oct 1, 2026
- 10 years
- Market
- EUR/USD
- 1-hour
Equity curve vs buy & hold
Returns year by year
| Year | Return | Trades |
|---|---|---|
| 2016 | -0.3% | 31 |
| 2017 | -6.2% | 127 |
| 2018 | +1.3% | 124 |
| 2019 | -10% | 134 |
| 2020 | -2% | 134 |
| 2021 | +2.5% | 131 |
| 2022 | -8.5% | 129 |
| 2023 | +1.1% | 140 |
| 2024 | -3.2% | 109 |
| 2025 | -5.7% | 98 |
| 2026 | -0.5% | 73 |
Calendar years, compounded from monthly results. The first and last years can be partial.
The London breakout is one of the most quoted forex day-trading setups. The Asian session is usually quiet and leaves a narrow range; when London opens, liquidity arrives and the price tends to break out of that range in one direction. Traders buy the break of the range high or sell the break of the range low, with the range doing the work of a natural stop. The idea is widely documented, for example by Quantified Strategies. We tested it on EUR/USD, the most traded pair, with a target twice the size of the stop.
The rules we tested
- Market and period: EUR/USD, 1-hour candles, October 2016 to October 2026.
- Asian range: the high and low of the previous Asian session, from 00:00 to 06:00 UTC.
- Long entry: the close crosses above the Asian session high, inside the London open kill zone (07:00 to 10:00 UTC).
- Short entry: the close crosses below the Asian session low, inside the same kill zone.
- Stop and target: a fixed 35-pip stop-loss and a 70-pip take-profit (2:1). There is no separate exit rule.
- Sizing and costs: 100% of equity per trade, 0.02% commission per side, $10,000 starting capital.
What the backtest shows
The breakout is not worthless, but it is close to neutral. With a target twice the stop, a strategy needs 33.3% winners to break even before costs, and this one won 36.3%. That small margin disappears once you look at what the trades actually paid. Of the 1,230 trades, 615 hit the stop, 338 hit the target and 277 closed on a signal rather than at either level. Those exits pull the average win down to 0.48% against an average loss of 0.31%, a realized payoff of about 1.5 to 1, which needs about 39% winners.
Costs widen the gap. At about 0.04% of the position per round trip, more than 1,200 trades add up to commissions worth a large share of the starting capital over the decade. The result is -28.0%, with a profit factor of 0.87 and a longest losing streak of 15 trades.
The risk profile is worse than holding the pair: the worst drawdown was 31.4%, against 24.0% for buy and hold, which itself ended flat at +0.07%. Only three years ended positive, and none by much: 2018 (+1.25%, 48 winners out of 124 trades), 2021 (+2.46%, 57 out of 131) and 2023 (+1.13%, 59 out of 140). The worst were 2019 (-10.0%, 38 winners out of 134 trades) and 2022 (-8.46%, 40 out of 129), and the last two full years lost again (-3.15% in 2024, -5.66% in 2025).
The 15-minute version on GBP/USD, with a 20-pip stop and a 40-pip target inside a 07:00 to 11:00 UTC window, did worse still: -60.0%, with a loss in every calendar year.
Why it doesn't work here
The logic is sound in principle: London does bring volatility, and the Asian range is a real reference level. But the setup is so widely known that the break of the range high or low is exactly where many orders sit, and the first move out of the range often stalls or reverses before reaching a 2:1 target. A 36% win rate, with winners cut short before the target, says the breakout direction carries very little information on its own. Without an edge in the signal, frequency is a cost, not an advantage.
What you could test next
- Require a minimum or maximum Asian range width, so you only trade sessions where the range is meaningful.
- Change the ratio: a 1:1 bracket needs 50% winners, which may suit a signal that often moves a little and then reverses.
- Add a trend filter, for example a higher-timeframe moving average, and take only breakouts in its direction.
- Trade only the first breakout of each day instead of every crossing.
Methodology and assumptions
- Starting capital
- 10,000
- Position size
- 100% of equity
- Commission
- 0.02% per side
- Data window
- Oct 2, 2016 to Oct 1, 2026
- Run date
- October 2, 2026
- No repainting: every signal is computed on closed candles only, so the backtest never acts on a price a trader could not have seen yet.
- Past performance does not predict future results. A backtest is a historical simulation, not a forecast.
Frequently asked questions
Is the London breakout strategy profitable?
Not on EUR/USD in this ten-year test: 1,230 trades, 36.3% winners, a profit factor of 0.87 and -28.0% in total. Only 3 of the 11 calendar years in the sample ended positive, and none of them by more than 2.5%.
What is the best timeframe for the London breakout?
We tested hourly candles on EUR/USD, and a 15-minute version on GBP/USD that lost 60.0%. Both timeframes produce over a hundred trades a year, which makes trading costs a major factor.
What stop-loss and take-profit does the London breakout use?
In this test, a 35-pip stop-loss and a 70-pip take-profit, a 2:1 ratio. 615 trades hit the stop, 338 hit the target and 277 closed on a signal before reaching either level.
Why does the London breakout lose money?
On paper the 2:1 bracket breaks even at 33.3% winners and the strategy won 36.3%. But the trades that closed on a signal before the target pulled the average win down to 0.48%, against an average loss of 0.31%, which needs about 39% winners. With more than a hundred trades a year, commissions widened that gap into a steady loss.
Reproduce it, then change it
Every number on this page comes from the Backtrex engine. Rebuild the strategy in the app, then change the market, the timeframe or a parameter and see whether the result holds.
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