Day Trading Setups in the EURUSD This Morning (+4% to account)

I don’t day trade the EURUSD every day, mainly due to time constraints, but I do often check it around 8:30 to 9:00 AM EST to see if there is a nice trend or trade setup. If there is, I trade. If not, I move onto other activities, such as looking for forex swing trades, checking on my stock market swing trades, or writing an article if nothing is going on.

I don’t typically day trade for more than an hour. I look for one to three trades between about 8:30 and 10 AM EST and then wrap up the day trading.

This morning presented some opportunities. 

I took two trades. Two winners, and increased the account by 4%.

Here’s how the trades unfolded

Prior to 8:35 the EURUSD was in a downtrend. 

At 8:43 it made a slightly higher low. This was an attempt to drop that failed. Not a buy signal, but worth noting from a price action perspective. 

We then had a rally (8:45 to 9) that erased nearly all of the big drop between 8:20 and 8:30. This is a potential price action reversal, in that the downtrend is in question. An uptrend could be starting. But we need a trade signal.

The price moved lower until about 9:10 and then turned higher again. We now have another higher swing low. The price then consolidates just below the prior high. We now have a small wave up that has erased most of the drop that occurred between 9 and 9:10.

The consolidation is the potential trade setup/trigger. If it breaks higher, I take the long trade. Stop loss below the consolidation. This trade resulted in about 3 pips of risk. 

A profit target was placed at 6 pips (2:1 reward:risk). Risking 1% of the account on the trade, hitting the target resulted in the total account balance increasing by 2%. See the Position Sizing article for more on how this works.

The second trade is a bit different in that we have a confirmed uptrend. The price then enters a correction but doesn’t make much progress to the downside. I am waiting for the price to coil up and then break to the upside. 

There is a consolidation of 4.2 pips, and then the price breaks to the upside. This was my entry. Target at 8.4 pips above the entry for a 2:1 reward:risk. Again, risk 1% and when the 2:1 target is hit the account increases 2% (or drops by 1% if its a loser).

Right after I got in the price consolidated again for some time. When the price broke that consolidation it was another good entry. 2:1 target was hit. 

I use the 2:1 R:R quite frequently in day trading. In swing trading, I go for more, in day trading I find 2:1 works well for me (although you could use bigger targets, especially if using the price structure method) as I am mostly trading off price action. I may alter the R:R a bit depending on the price action that day but in both these cases, at the time of the trade, the R:R of 2:1 seemed valid. 

On the first trade, even though we had a nice buy setup, we had dominant selling action most of the morning prior to the setup. Take the profit and see what unfolds. Don’t get greedy on potential reversals.

As for the second trade. We had just had a big run higher. We were approaching the highs of the day (black horizontal line). There is often a false breakout of the highs or lows when they are tested for the first time later in the day after an extended move. A target near the prior high aligned with the 2:1 target.

By Cory Mitchell, CMT @corymitc.

Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.