When day trading forex, I use this strategy to capitalize when the price of the EURUSD nears the session (London or New York) high or low. There are typically stop orders clustered above the session high and below the session low from people who placed trades earlier in the session. That means that when the price approaches the session highs and lows with some momentum, it often blasts through (sometimes only temporarily).
This doesn’t mean we just buy at the session high and short at the session low. We need a strategy to capitalize.
When to Trade the “Session High Low” EURUSD Day Trading Strategy
This strategy can be utilized once London has been open for at least 1 hour, and any time during the New York/London overlap period. It is possible to get trades once London closes, and only New York is open, but you want to make sure that the price is still moving a fair bit (compared to earlier in the day). If the price is only moving a few pips on each price swing after London closes, then don’t use the strategy. Don’t use the strategy near the end of the New York session or after it closes.
Trade the strategy after 3 AM EST and prior to 3 PM EST
Session High Low EURUSD Day Trading Strategy Setup
There are multiple variations for this strategy. Ultimately, we are simply looking for price action setups that indicate the price could move to and through the session high or low.
Once the session high or low is set, the price must move significantly away from it. This a requirement. Our strategy comes into play once the price moves back, close to, the session high or low (after having moved significantly away from it for a while).
I use a 1-minute chart.
The session high and low are a moving target. At a given point in time, there is only one session high and session low. Old ones no longer matter for this strategy once they have been penetrated.
One of the simplest versions of the strategy is to watch for contracting volatility just below the session high or just above the session low (when the price re-approaches). This typically looks like a triangle pattern, but it doesn’t need to look perfect or have nice trendlines. The price swings just need to be contracting (getting smaller with each passing one).
Once the price starts contracting, then watch for a consolidation. A consolidation is when the price moves mostly sideways for at least three price bars.
The price must then break out of the consolidation in the direction (toward) of the session high or session low.
I have found slightly better results when the consoldiation forms on the same side of the contraction as the session high or low. For example, near the session high, the consolidation occurs in the upper half of the triangle/contraction pattern, preferably near the top of it.
Charts from TradingView.
This strategy may provide one or two trades a day, but not always. Occasionally it produces more, but some days it produces none simply because the price doesn’t form the right pattern.
There are multiple variations of this strategy with slightly different setups. Look at your charts near the session highs and lows and see if you can spot any other patterns that tend to produce favorable results. You will see that price usually pops through it.
For other trades, check out the Technical Turnaround EURUSD Day Trading Strategy (coming soon!).
EURUSD Session High Low Strategy: Stop Loss and Target
The stop loss part of the strategy is simple. Put the stop loss on the other side of the consolidation. If the breakout was to the upside (near a session high) place the stop loss 0.2 pips below the consolidation low. If the consolidation breakout was to the downside (near a session low) place the stop loss 0.2 pips (plus the spread) above the consolidation high.
You could use a trailing stop loss, or a fixed reward:risk ratio. This latter choice is the simplest and will likely work best for most people.
Utilize a 2:1 reward:risk, meaning if the distance between the entry and stop loss is 4 pips, then the target is placed 8 pips away from the entry. If the stop loss is 5 pips, place a target 10 pips away.
With a 2:1 reward to risk, you can win 40% of your trades and still be profitable. The goal is to win more than that, but even with a 40% win rate the strategy is profitable. A 60% win-rate is achievable with this strategy; a 50%+ win rate is the goal.
Often you can get away with a larger than 2:1 reward:risk, but it may mean holding through some ups and downs in the price. Start with 2:1, and if you notice that you’re leaving money on the table, look through your results and see what your R:R could have been used. Or consider the use of a trailing stop loss.
Or, if you notice a lot of momentum, or the price is really coiled up and looks like it could explode, possibly look at using a larger target or utilize an aggressive trailing stop loss once the price has surpassed your 2:1 reward:risk target (order not actually placed). In this case, just use a market order to exit the trade once the trailing stop loss is triggered.
This is favorable in situations like the following chart example. It shows a 2:1, for a 5.5 pip profit…but the aggressive trailing stop loss would have resulted in a more than 27 pip profit and about a 10:1 reward:risk. If risking 1% on the trade, the account would be increased by 10% on this trade alone due to position sizing.
To place quick entries, with a stop loss and target attached, you could use the Market Depth feature in MT4. Go to View>Market Watch. Then right-click on the EURUSD and select Market Depth.
As the price is consolidating you will know how big your stop loss is. Put it in the SL box. If your stop loss is going to be 4 pips, put 40 in the box (because it is based on fractional pips). If your target is going to be 8 pips, put 80 in the TP box. Enter your position size in the middle box based on your account size, stop loss level, risk tolerance (linked to above). To calculate position size quickly, you can use this online position size calculator. Be sure to test this all out in a demo account before using, some brokers may be different.
When the price breaks above the consolidation, click Buy (near session high). When the price breaks below the consolidation, click Sell (near session low). This should instantly get you into a trade with your stop loss and target also placed. If a confirmation screen pops up, that could slow you down. You can turn this off by selecting one-click trading in the in Tools>Options>Trade>and selecting the One Click Trading box.
Let’s look at some of the trade examples that have occurred based on variations of the Session High Low strategy. As mentioned, there are multiple ways to enter trades when the price approaches the high or low.
At about 10:05 EST the price approached the daily low (blue horizontal line) set earlier in the London session. The price drifted higher. The price then fell close to the low and formed a consolidation. We know that lots of people likely have stop orders (entry and exit) below that daily low level, so it is likely to get touched and shoot past, even if only briefly. A consolidation just above the daily low provided an entry opportunity.
This entry isn’t exactly like the “contraction” entry method discussed above. We didn’t have a big contraction in price. Just a consolidation that provided an entry near the key level. This same pattern played out a couple other times earlier in the session as well (also marked). There isn’t always a contraction. So we can be on the look for contractions, OR, sometimes just consolidations provide us our entry.
There are potentially many ways to play the session high low strategy once we know that the price often pops through the high/low. We just need to wait for the momentum to start moving toward that high or low, and then wait for a consolidation or contraction to trigger us into the trade for the potential daily high/low breakout.
The stop loss goes on the opposite side of the consolidation, and a profit target is placed at a 2:1 reward:risk.
The chart below may look a little squished. That is because when I trade I typically use the same y-axis amount each day. This way, I can assess price wave size day to day on the same scale. If you zoom in, even a 5 pip move looks huge. I typically set my y-axis to a little more than the daily average movement. Around this time it was 80 pips per day, so my y-axis is (manually) set to 80 pips….just in case you were wondering. The y-axis amount changes over time. On most of my example charts I zoom in to make the patterns clearer.
Here is a video explaining the strategy further.
By 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