The Snap-Back is a EURUSD day trading strategy for the 1-minute chart that captures high momentum situations during a trend.
I trade this strategy between about 8:00 am EST and 11 am EST, but it can be used any time between 3 AM and 11 AM EST as that is when there is the most movement during the day. I use a 2:1 to 2.5:1 reward:risk.
Snap-Back EURUSD Day Trading Strategy
A snap-back in a downtrend looks like an “h”. It is composed of a few key elements:
- A sharp drop below the prior swing low (a component of a downtrend).
- A sharp rally that stays below where the drop started.
- Another sharp drop back to the recent low (bottom of what now looks like an “h”)
- At least a two-bar/candle pause near the low of h…slightly above or below is fine.
- Enter on a breakout below the low of the two-bar pause. This is the default trigger for entry, but there are several variations that can occur if the price moves up slightly before dropping. A few of these variations are discussed in the video below.
- Sharp moves…if price is just drifting up and then drifting back to the bottom of the “h” taking its time, that is not a high momentum situation and I wouldn’t trade this.
The chart below shows the basic pattern. There are some other trades and strategies on this chart as well, but the snap-back is marked with the black wavy line and is the last trade on the right. This one occurred after I had finished trading for the day but it still occurred during that prime EURUSD day trading window.
There is an h pattern that matches the criteria mentioned above. Wait for at least a 2-bar pause at the bottom of the h. Enter short when the price drops below the low of the 2-bar pause. During the 2-bar pause, measure the height of the 2-bar pause, add your spread, and this is your stop loss distance. Multiply by 2.5 to get the target price. [If you have a larger spread than 0.5 pips, you may need to reduce the reward:risk. The criteria I use are based on having a small spread.]
Here are more examples, with slight variations on the entry in some of them. In the middle of the chart, there are three Snap-Backs in a row, each one leading into the next.
During an uptrend, the pattern looks like a strong up move with a “u” on the end. The example below marks the importance of understanding trending waves; I included some notes on the chart. The same criteria apply as listed above, except now everything is flipped—strong up move, smaller but sharp down move, sharp rally back to high, two-bar or longer pause, and then a breakout higher above the two-bar high.
How I trade now, I probably wouldn’t take the trade above. It has drifted sideways for too long. But that is just my personal taste; I don’t like getting in evolved when price seems to be drifting. I prefer share crisp moves.
Here is a video that further explains the strategy.
How Often This Pattern Occurs
I used to notice this pattern quite a bit more, but recently I have traded it a lot less. That doesn’t actually mean the pattern didn’t occur, it just means I may have been more focused on other strategies or patterns. ALSO, I often now categorize many Snap Backs simply as Trend Continuation (TCs) trades, another strategy I use that is based on a strong move followed by a pullback or consolidation. This means many snapbacks are also TCs, which I trade a lot. So my labeling over the years has changed a bit, the pattern is just as valid today as it always has been.
Here are a couple more examples.
And this next one was for a big profit as it shot higher and cleared through a couple of magnet areas. Consolidation was just slightly below prior higher and within a longer-term uptrend.
Practicing and Fine-Tuning Before Trading With Real Capital
Go through many charts to find examples of the pattern during the hours you typically trade. Use a 1-minute chart and account for your spread when assessing stop loss levels and profit targets. See how the strategy would have faired for you, based on the patterns you see. Don’t trade the Snap-Back strategy with real money until you find a way to make it profitable for you and your circumstances. As mentioned, I have not been monitoring for this pattern as much recently so you can determine how many setups you see and if it is worth incorporating into your trading plan at this time.
The 1-minute chart is the only time frame I day trade, and the EURUSD is the only pair I day trade. If you trade other time frames, pairs, at a different time of the day, or trade with a large spread, I have no idea if this strategy will work for you. I also have no idea what your eyes see that mine don’t, or vice versa. This is why you need to go through your charts and practice the strategy before risking real capital with it. Here are 6 efficient steps to get you to profitability as quickly as possible.
If it is not profitable for you, but you like the concept, dig into why certain trades worked and others didn’t. Possibly you were trading against a larger trend, or you didn’t check for news, or the price waves were too small, or you had your stop loss in the wrong place. Maybe your forex broker has a larger spread, and so you need to reduce your reward:risk to 2:1 or 1.75:1 in order to make the strategy profitable.
Find what works for YOU, creating your own guidelines for how YOU will trade the strategy. Put in the work to make it your own, so you develop the confidence to trade it well.
For more strategies, and an entire method of day trading the EURUSD, check out the EURUSD Day Trading Course. It outlines what you need to get started, tradable patterns that occur nearly every day, and how to improve along the way.
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.