Instead of having a random y-axis on your EURUSD day trading chart, consider using the same scale every day. Increase it only if the price action of the day requires it. Don’t trade until you have scaled your y-axis appropriately. Here’s why.
Set Your Y-axis Before Day Trading
I always set my Y-axis on my EURUSD day chart to the average movement of the pair over the last 10 weeks. I do this immediately upon logging in. That way, I can instantly see if volatility is higher or lower than normal, and I can adjust my trading and expectations accordingly.
Mataf provides the 10-week average of how much the EURUSD moves per day.
It is this amount that I use as my y-axis, rounded to the nearest 5 pips or so. For example, if it says the average is 71.6 pips, I will set my y-axis at about 75 pips. If the average is 124 pips, I will opt to set my y-axis at about 125 pips.
Since the average is calculated over 10 weeks, this number isn’t going to change much from day to day. Therefore, I only check it every couple of weeks. That means my y-axis stays the same for a couple of weeks in a row…and quite often for months in a row since overall volatility may not change much.
Why Set Your Y-axis Before Day Trading?
When you open your charts or log in to your trading platform, quite often the chart is zoomed in on the recent price action. If the price has only moved 10 pips in the last couple of hours, the chart’s y-axis will typically only show 10 pips. The price action will fill the screen.
This makes it look like there is lots of movement and nice trends. But this is a visual illusion. If you keep your scale at the daily average movement (or more if needed on some days) you will be able to instantly see if this is a typical day, or if volatility is lower or higher than normal. This process creates a visual baseline each day.
Don’t think it makes a difference?
Look at the following two examples. The average movement was 67 pips per day at this time, so a scale (y-axis) of 70 pips is recommended.
Upon logging in, this is what my charting platform showed me. Without close inspection of the y-axis, it actually looks like there’s quite a bit of movement! Some nice trending moves!
Live EURUSD chart on TradingView
If someone wasn’t paying attention, they could be lured into a trade, thinking there is lots of movement.
Below is the exact same chart, but with the y-axis now scaled to show approximately 70 pips. An entirely different perspective! Are you still as inclined to trade? I hope not. We can instantly see that the price is barely moving at all. It get chopped up paying spreads and commissions very easily.
Take away as many traps as possible before they occur. Setting your y-axis before you start trading is one way to maintain visual consistency from one day to the next, and thus potentially avoid getting lured into poor trading opportunities.
And to be consistent in your trading, try to keep as many consistencies as you can from day to day!
By setting my y-axis to the average daily movement, immediately upon logging in, I can instantly see if a day is more or less volatile than usual. My y-axis doesn’t drop below the current average, but I will expand it if needed to be able to see the whole day’s price action. For example, if the price has moved 100 pips today, I will expand my y-axis so I can see the highs and lows on my chart, even if the average (and thus my scale) is 75 pips. Even then, I will usually keep the scale at what I am used to seeing.
Below is an example of a day when average volatility was around 120 pips. I set my y-axis close to that.
It was lower movement when I started (first vertical line), but then we started getting more movement, which tells me this a normal movement and I can trade as such.
This day produced more than 11R in profit (11% if risking 1% fo the account per trade).
Below is another chart where the average movement was around 76 pips. Upon logging in at 630 I adjust my y-axis to 80 pips, and I can instantly see this is a normal day with typical movement.
This loosens up my reigns a bit and I am freer to attack trades as I see them, knowing that there’s movement already and I don’t need to wait for it. In low movement, I typically wait for increased movement to occur before jumping into trades. [The chart below is before I started incorporating my TC strategy, which is now included in the EURUSD Day Trading Course…incorporating that strategy on a day like this would have led to at least an additional 7.5R in profits].
The day below was a lower movement day. Average volatility was around 125 pips per day. When I started trading (first vertical line) price was drifting. It wasn’t taking up most of the screen like a typical day would. What does that mean? Well, I instantly know it’s a bit slower day. I can be a bit more cautious and wait for moments of bigger price movement before pouncing.
Each day presents different opportunities. Knowing what the average volatility is, and then having my y-axis set to that, helps me instantly see if I should be day trading cautiously (defensive until movement comes in) or if I can trade more aggressively to capitalize on the movement. A simple trick, but I find it helps.
Want more simple tips like this to help you crush the forex market?
Check out the EURUSD Day Trading Course. It covers everything you need to day trade the EURUSD in two hours or less, including strategies, routines, and mental-game work to get you into the profit zone.
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.