I am continuing to add articles that discusses day trading the EURUSD. So far I have documented several strategies that can be used during the London or New York sessions. I primarily use the 1-minute chart, and that is what these methods are based on.
I don’t know if they work on other time frames or in other pairs. I don’t trade day trade other time frames or pairs.
A complete day trading method requires a way to enter trades, exit losing trades, and take profit profit on winners. It also requires money management and position sizing. These are the basic requirements. The follow sections provide information on each of these requirements.
EURUSD Day Trading Strategies
These are entry and exit methods for day trading the EURUSD 1-minute chart. I have also provides links to more examples.
Since these two strategies are based on the same setup, most of the examples I have provided look at both types of trades.
Stop Losses and Profit Targets
Each of these strategies has a stop loss. A point where we get out of the trade if it doesn’t move our way. With the Tech Turn strategy sometimes we will be getting stopped only to enter a Failed Tech Turn in the opposite direction.
Each strategy also has a profit target. It is set at 2x the risk. This means each trade has a reward:risk of 2:1. It means our winners will be twice as big as our losers. Even if we win less than half our trades we will be profitable. Therefore, profitable day trading just becomes about getting good enough to keep that win rate above about 40% (still profitable). As you get better, your goal is to get that win-rate up to 50% and then 60%.
Position Sizing for Day Trading the EURUSD
It doesn’t matter how good your strategy is, if you risk too much you will lose everything if you hit a losing streak (and it does happen). If you risk too little you won’t see your account grow as much as it could. Position sizing is pivotal to profitable and consistent day trading (and any type of trading).
When starting out, risk 0.5% of the account or less until you profitable. Then move up to risking 1% (or you could stay at 0.5%, nothing wrong with that, especially with a large account). Some people risk more, but there is little need. Once your account becomes a decent size, you can make a lot of money risking 1% per trade.
To learn more about position sizing, see Three Effective Sizing Methods for Trading Forex. For day trading the EURUSD, I use a fixed 1% risk on each trade. And I don’t hold trades though high impact news events (published on an economic calendar).
Final Word on Day Trading EURUSD
These articles should give you a great start on day trading the EURUSD. Between the strategies discusses, you will usually have at least one, and often multiple, trades each day even if you only trade for one or two hours. And if there are no trades setups you like one day, that is OK too. If I don’t see any nice trades, I prefer to save my money for another day and better trades.
I will be adding one more strategy to this list soon. Say tuned for that.
By Cory Mitchell, CMT. Join me on Twitter @corymitc.