The double-pump EURUSD day trading strategy is a trend-following pattern that I use when day trading the 1-minute chart. Use it during the European Session or US session (but ideally NOT within the last three hours of the US session).
That’s between about 2 or 3 AM EST to 2 or 3 PM EST. The exact times aren’t important, we just want action, and it typically occurs between these times. Outside these times the price action is choppier, quieter, and the strategy will not work as well.
This pattern may work on other pairs, other time frames, or different times of the day, but you’ll have to research that for yourself to see. I only day trade the EURUSD 1-minute chart. I personally trade from about 830 to 1030 AM EST (my charts are in Mountain Time though, from 630 to 830).
I use a 2.5:1 reward:risk. The basic strategy is to let the price hit the stop loss or target. Don’t exit early unless there is a high-impact news announcement or another valid trade signal from another strategy occurs in the opposite direction.
Double-Pump EURUSD Day Trading Strategy
A double-pump trade signal must occur in the current trend direction. Trend direction is determined by the most recent Impulse/Trending wave.
A double-pump in an uptrend looks like a “W” where we are entering near the second bottom as the price turns higher.
Here is the how the pattern is created, in order, and traded.
- An uptrend is in play.
- A drop, typically between about 4 and 8 pips, that doesn’t drop below any swing lows in the prior uptrend.
- A rally back to the high (within 1.5 pips)
- A drop back to the prior low, and the low is within 1.5 pips of the prior low.
- A shift to the uspide occurs: price moves above the high of a prior candle.
- Enter on the shift to the upside. Once the bid price of the EURUSD is above the high of prior candle, buy immediately. This can be done with a buy stop order or a market order.
- Place a stop loss below the low that just occurred.
- Target is placed at 2.5 x the risk.
- If the stop loss is 3 pips, place a target 7.5 pips above the entry.
- If the stop loss is 2.5 pips, place a target 6.2 or 6.3 pips above the entry.
- You will want a forex broker with a small spread (under 0.4 pips) and ideally low commissions (under $5 per 100K, ideally lower) for this strategy.
- THESE TRADES OCCUR FAST. YOU NEED TO BE ON THE BALL. CONSTANTLY TALK THROUGH THE PRICE ACTION SO YOU ARE READY TO POUNCE AT THE EXACT RIGHT MOMENT.
Below are some examples of double-pump (DP) strategy trades. There are examples of other strategies on these charts as well, but we are only focused on the DPs right now.
The third trade on the chart below is a double pump within an uptrend. The price is making progress to the uspide, it drops back, pushes back to the swing high, drops back down, and moves above the high of a prior candle (entry). The red box represents the risk of the trade with the bottom of the red box being the stop loss location. The top of the green box represents the target. The line between green and red is the entry point. And I will explain what “R” means a bit later on.
Big potential day for #daytrading the $EURUSD today. +7.32R in potential. I had a domino error…where one error creates a second error; missed one trade and writing notes resulted in missing another. +2.32R pic.twitter.com/3BHLWQ58cY— Cory Mitchell, CMT (@corymitc) February 25, 2021
I publish my daily day trading charts on Twitter.
I actually missed this trade and lost out on a quick 2.5:1 trade. While the highs and lows are a tiny bit different they are within 1.5 pips of each other.
Another way to think of it, is that the double pump pattern looks like a tiny range or square.
Downtrend Version of the Double Pump EURUSD Day Trading Strategy
The concept for a double pump in a downtrend is the same. Except now we need a downward price move with an “M” pattern. We are entering on the second peak as the price transitions back to the downside. The stop loss goes above the recent swing high that just occurred, and a target is placed at 2.5x the risk.
The first trade on the chart below is a classic example of a double pump EURUSD day trading strategy.
The price drops, has a little bounce off the low, drops back close to the low (within 1.5 pips, above or below), and then rallies back up to near the prior little swing high (within 1.5 pips above or below).
With all the conditions met, we are waiting for the price to drop below a candle low, this occurs on the big red down bar. We don’t wait for the candle to complete. We enter as soon as the price drops below a candle low after reaching near the top of the pattern.
This particular trade had only had about 2 pips of risk, so our target is placed at 5 pips below the entry for a 2.5:1 reward:risk.
If risking 1% of our account on this trade, we make a quick 2.5%.
I actually recorded myself day trading on the day above. Watch the video here as I talk through the trades in real-time.
The third trade, on the chart below, is also a double pump in a downtrend.
The fourth trade is also a DP, but notice how it is angled upward; the second low is above the first. I consider taking this trade a mistake. The pattern performs better when the lows and highs are similar (low within about 1.5 pips of prior low, and high within 1.5 pips of prior high). On this fourth trade, the second low was more than 1.5 pips away from the prior low (angled red line).
And of course, not all these patterns work out. In fact, only about half of these trades will produce a winner. Yet it can still be a very profitable strategy because of the reward: risk. Some of the recent statistics are discussed below.
The first trade on the chart below failed, but then quickly transitioned into another strategy I trade.
Solid potential of +7.46R #daytrading the $EURUSD today. I captured about half of that after missing one trade and an early exit because I wanted to go eat. Another +2.5R occurred a little after I was finished. pic.twitter.com/vCDP51klsl— Cory Mitchell, CMT (@corymitc) March 9, 2021
How The Double Pump EURUSD Day Trading Strategy Performs
The strategy has about a 50% win rate over time.
In January 2021 the strategy produced 12.93R for the month, in the 2-hour window I trade. R is a standardized measure of risk. So if you risked 1% per trade, the strategy produced 12.93%. Risking 0.5% per trade, it produced 6.465%, or risking 2% per trade it produced 25.86% for the account.
In February 2021 the strategy produced 28.79R, in the 2-hour window I trade.
Weekly and monthly updates on the strategies are posted on the site under the Forex > Day Trading Lessons section.
You may also want to check out the Snap Back Strategy. It produced 13.89R in January and 6.69R in February. Combine with the Double pump to get the returns for both strategies.
Other Considerations for the Double Pump EURUSD Day Trading Strategy
I don’t take trades right before news, nor do I hold trades through major economic news announcements. I look at an economic calendar as part of my morning routine and get out of trades prior to the news events marked high-impact in the USD or EUR.
I don’t take new day trades if there is less than approximately 15 pips of movement in the last two hours. This is a guideline, not a rule. I just need to see enough movement to likely compensate me for my risk.
This pattern should be relatively small compared to the price move preceding it. The pattern is a big up or down move, followed by this relatively small double pump pattern. If the pattern gets too big, it loses its power. The pattern should be smaller than the last wave of the trend. For example, if the price moved higher, and then pulled back, and then moved to a new high, if a double pump occurs after this it should be smaller than the size of the last move up. Go through the examples above and you will see the pattern is a portion (smaller) than the size of the price wave immediately preceding the double pump.
The price waves of the DP pattern should be distinct. Not just a bunch of sideways price bars all the same size (a consolidation). We want to see the little price waves on those W and M patterns clearly and distinctly.
This pattern is what I call a symmetrical double-pump because the swing highs and lows are very similar and create a small little range. We will often see non-symmetric double pumps too. This is where the highs and lows are at different levels. This requires more patience, and I don’t trade “skewed” patterns the same way I trade symmetric double pumps. For skewed patterns, the trade setup is different, and I call it a Double Pump Variation (DPV).
For some examples of the DPV, check out my daily charts on Twitter, along with examples of rounded tops and bottoms (RT, RB) which is another strategy I regularly use.
By Cory Mitchell, CMT
The EURUSD Day Trading Course will be out by the end of May 2021, covering all the main strategies, and variations, that I use to day trade the EURUSD in 2 hours or less a day.
In the meantime, if you are new to forex, prepare yourself for the day trading course with the Forex Introduction Course.