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 67.7 pips, I will opt to set my y-axis at about 70 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 platform showed me. Without close inspection of the y-axis, it actually looks there is quite a bit of movement! Some nice trending moves!
Charts are provided by 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.
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 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 never drops 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.
Below is an example of a day when average volatility was around 75 pips. I set my y-axis to 75-80 pips. Upon logging in, I can instantly see we are having a low volatility day. That immediately puts me on the defensive. I start trading at 630 am my local time (830 EST) and finish up between 830 and 9 am (11 am EST).
Some movement did come in later during my trading time. For my strategies, this day offered one trade for a 2.5% gain on the account on a 2.5:1 reward:risk trade. This trade risked 1% of the account, see Position Sizing (1% risk method).
By instantly seeing it was a low volatility day, I was better prepared to await good opportunities instead of trying to force a trade when the price wasn’t really moving.
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 lots of movement.
This loosens up my reigns a bit and I am freer to attack trades as I see them, knowing that there is 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.
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.