Use a 1-minute EURUSD chart for this day trading strategy, during the London and/or US session. The strategy is best applied between 3 AM EST and noon EST.
A failed technical turnaround occurs when a technical turnaround fails (read that article first). We have isolated a trade trigger for the technical turnaround, but instead of moving in the new direction, the price moves back in the old trending direction. In other words, the turnaround or trend-direction-change failed.
The technical turnaround (“tech turn” for short) typically produces a number of trades during the timeframe. By incorporating failed tech turns we get more signals, which means more trading opportunities. Add in the EURUSD Session High Low Strategy for more possible day trades.
Failed Technical Turnaround Day Trading Strategy
To understand the failed tech turn, we need to understand the setup for the tech turn, because only one thing changes. Here is the setup for the tech turn.
1. That basic concept of the strategy is that we need to the price to move back up to near a prior swing high after a decline, or back down to a prior swing low after a rally. [This is what indicates a possible trend change.]
2. The price must then make at least one small price swing before consolidating. [This price swing can’t move far enough to trigger a tech turn in the other direction…because then we have a setup going the other direction.]
3. The price must then break out of the consolidation in the expected direction to trigger a trade.
4. A stop loss goes just outside the opposite side of the consolidation.
5. The simplest profit target is placed at a 2:1 reward:risk. For example, if risking 3 pips on a trade (approximate height of consolidation), place a profit target 6 pips from the entry. If risking 6 pips, the target goes at 12 pips.
For the failed tech turn, everything stays the same, except number 3. Instead of breaking out of the consolidation in the newest direction, it breaks out in the old trend direction.
A tech turn is a possible trend reversal price pattern. But the trend may sometimes look like it is about the reverse, but then the old trend continues.
It is also possible that the tech turn will trigger, but then fail to reach the profit target, turn the other way and trigger a failed tech turn.
Below is an example of a failed tech turn. A swing low is made during an uptrend. The price drops back to that swing low. This is the first sign of a possible reversal. An uptrend requires requires higher swing highs and higher swing lows, so once the price drops back to the prior swing low, the uptrend is in possible trouble.
There is another price swing, and then we are waiting for a consolidation. If this trend is to reverse to the downside (tech turn), the price needs to break out of the consolidation to the downside. It doesn’t. It breaks to the upside. Go long, in the direction of the overall uptrend. The price trend didn’t reverse.
A 2:1 profit target is used, and a stop loss is placed just below the consolidation.
If you decided to trade for a 12 period, below is how your chart could look on a given day. There were lots of trades this day; more than usual.
Assuming a risk of 1% on each trade, losing trades are -1% to account equity, and winning trades 2:1) are +2% to account equity.
Here’s more examples of how these strategies are used together.
Don’t be Discouraged If This Looks Hard
Did you look at the charts and scratch your head? That’t totally fine, and expected. We need to train our eyes, and our brains, to see these types of patterns. I don’t see them all and I have been trading this way for years. I still look through my charts at the end of the day and say “How did I miss that one.” Yet even if you miss a few trades, there are still lots out there you will see…with practice.
I suggest you print off the chart examples (rotate them vertically and then print them, so they are nice and big). Study them. Ask yourself “What the hell is he doing?” Look at the price waves, compare them, and then you may start to understand a trade.
Then you may be able to spot one or two. Then you start noticing more. It is a process.
Some Additional Notes on the Failed Tech Turn Strategy
Look for examples of the strategy on your own charts, then decide how you want to utilize the strategy. Create your own personal rules and checklist. Practice in a demo account and make sure you can trade the strategy profitability before attempting it with real money. This strategy requires thinking ahead and quick reflexes.
I typically use market orders (with a target and stop loss attached) to buy or sell when the trade triggers. You could also put stop entry orders (with target and stop loss attached) just outside the consolidation to be triggered if the price moves out of the consolidation.
As for whether the strategy works on other pairs or time frames, I don’t know. I only use this strategy on the 1-minute EURUSD chart. It may work on other time frames and currency pairs, but check it out yourself before attempting to implement it.
For help in understanding the tech turn and failed tech turn, its important to understand price action. Here’s a video on analyzing price action.
Cory Mitchell, CMT
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.