Use this strategy on the 1-minute EURUSD chart during the London and/or US session. I’d wait till the London session gets going, so the strategy is best applied between 3 AM EST and noon EST.
This strategy typically generates at least one trade during the time frame discussed, often more. Sometimes it will generate two or three trades during the London/New York overlap period (8 AM EST to noon EST), but not every day.
This is a price action reversal strategy, designed to get into a trade when a reversal is likely occurring. Not every reversal generates a trade signal though. We are waiting for specific conditions that help put the odds in our favor.
The Technical Turnaround EURUSD Day Trading Strategy
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.
The price must then make at least one small price swing before consolidating.
The price must then break out of the consolidation in the expected direction to trigger a trade.
A stop loss goes just outside the opposite side of the consolidation.
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.
Here’s an example of a reversal to the downside. The price falls back to a prior swing low and has a couple of swings before consolidating. The price then breaks the consolidation to the downside, triggering a trade.
This trade occurs during the London session.
The trade had 2.4 pips of risk, with an exit at a 4.8 pip target for a 2:1 reward:risk. If risking 1% of the account, the winning trade increases the account by 2%.
The next trade came after the start of the US session. Some unexpected news occurred just after the entry resulting in a big move. But the trade still captured a 2% gain to the account.
Here are another couple of examples of the strategy that occurred the following day.
EURUSD Day Trading Strategy Thoughts and Alterations
I prefer to be in and out of my day trades rather quickly. This is because I typically only trade for an hour or two when I do day trade.
As you can see, since we are trading a reversal strategy, the price will often continue to run in the new direction which means you could use a bigger target or a form of trailing stop loss that potentially captures more profit when a big move occurs. Of course, this may also mean having to get out with a smaller profit or a loss if the price reverses again while you are waiting for that big gain.
Look for examples of the strategy playing out on your own charts, then decide how you want to utilize the strategy, creating your own personal rules. Practice in a demo account and make sure you can trade the strategy profitability before attempting it with real money.
As for whether it works on other pairs or time frames, I don’t know. I only use this strategy on the 1-minute EURUSD chart. Although, I do use it to trade stocks as well, on a daily chart. Therefore, it likely would work on other time frames and currency pairs, but check it out yourself before attempting to implement it.
A similar pattern will often occur as a continuation pattern as well. I especially like it during a trend when the price is nearing the daily high or low. See the second trade in this article for an example of that.
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.