Use a 1-minute EURUSD chart for this day trading strategy, during the London and/or US session. The strategy is best applied between 3 AM EST and 1 PM EST.
A failed technical turnaround occurs when a technical turnaround fails (read that article first). Essentially, what looked like a trend reversal failed to develop. Instead of moving in the new direction, the price moves back in the old trending direction.
The technical turnaround (“tech turn” or TT for short) typically produces a number of trades during the day. By incorporating failed tech turns (FTT) we get more signals, which means more trading opportunities.
While I call this a strategy, it is actually a concept or pattern. Something to look for, which could potentially be traded in different ways. I provide several ways the pattern can be used in this article.
Failed Technical Turnaround Day Trading Strategy
To understand the failed tech turn, we need to understand the setup for the tech turn, because only one thing changes. Here is the setup for the tech turn.
1. That basic concept of the technical turnaround is that we need to the price to move back up to near a prior swing high after a decline, or back down to a prior swing low after a rally. [This is what indicates a possible trend change.] These should be substantial price swings, not tiny gyrations.
2. The price must then make at least one small price swing and then consolidate. [This price swing can’t move far enough to trigger a tech turn in the other direction…because then we have a setup going the other direction.]
3. The price must then break out of the consolidation in the expected direction to trigger a trade.
4. A stop loss goes just outside the opposite side of the consolidation.
5. The simplest profit target is placed at a 2:1 reward:risk. For example, if risking 3 pips on a trade (approximate height of consolidation), place a profit target 6 pips from the entry. If risking 6 pips, the target goes at 12 pips.
For the failed tech turn, everything stays the same, except number 3. Instead of breaking out of the consolidation in the newest direction, it breaks out in the old trend direction.
A tech turn is a possible trend reversal price pattern. But the trend may sometimes look like it is about the reverse, but then the old trend continues.
It is also possible that the tech turn will trigger, but then fail to reach the profit target, turn the other way and trigger a failed tech turn.
Below is an example of a failed tech turn. A swing low is made during an uptrend. The price drops back to that swing low. This is the first sign of a possible reversal. An uptrend requires higher swing highs and higher swing lows, so once the price drops back to the prior swing low, the uptrend is in possible trouble.
There is another price swing, and then we are waiting for a consolidation. If this trend is to reverse to the downside (tech turn), the price needs to break out of the consolidation to the downside. It doesn’t. It breaks to the upside. Go long, in the direction of the overall uptrend. The price trend didn’t reverse.
Charts from TradingView.
A 2:1 profit target is used, and a stop loss is placed just below the consolidation.
Assuming a risk of 1% on each trade, losing trades are -1% to account equity, and winning trades (2:1) are +2% to account equity.
Here are more examples of how these strategies are used together. Follow the black lines to see the tech turns to the upside, and the red lines to see the tech turns to the downside. Once there is a tech turn, there is a possibility for a failed tech turn.
Below are more examples, and we need to consider how much the price is moving. We have a failed tech turn trade, but the stop loss is too big to take the trade based on my judgment. We then have another trade opportunity but the stop loss is still too big for the price action we are seeing. We finally get a failed turn to the downside (with the stop loss and target drawing on it). Also, note on the very far left (+2) is a EURUSD Session High Low Strategy trade.
I know that these charts look like a mess, but I wanted to draw the lines so you can hopefully see the patterns better. Take some time and trace the lines. Once you start to see the patterns, you won’t need to draw the lines.
Keep in mind we have a price wave erasing a prior price wave, then we need another swing, and then a consolidation. So near the middle of the chart above, we have the red curved lines marking a potential reversal. There is a big swing down, then a little one, when a consolidation. We are waiting for all of that before acting. In this case, the pattern failed to produce a meaningful reversal and presented an opportunity to go long (failed tech turn).
Here are a few more examples.
In the middle of the above chart you may say “There are a bunch of tech turns between about 945 and 1030.” There are moves that erase prior moves, but they don’t fully form a possible trade, because there isn’t a smaller price swing and then a consolidation. It is just chopping back and forth. It could have been very easy to overtrade in that period, likely taking multiple losses. Wait for the patterns to fully set up.
The video also explains the trades.
Don’t be Discouraged If This Looks Hard
Did you look at the charts and scratch your head? That’s totally fine. We need to train our eyes, and our brains, to see these types of patterns. I don’t see them all and I have been trading this way for years. I still look through my charts at the end of the day and say “How did I miss that one.” Yet even if you miss a few trades, there are still lots out there you will see…with practice.
I suggest you print off the chart examples. Study them. Look at the price waves, compare them, and try understand why certain trades were taken and others weren’t.
Then you may be able to spot one or two. Then you start noticing more. It is a process.
Currently, this strategy is not in my trading plan. It is a good strategy, but I mainly focus on the ones covered in the EURUSD Day Trading Course. Try it, and if you like it, that’s great. If not, that ok too. Plenty of other strategies out there.
Some Additional Notes on the Failed Tech Turn Strategy
Look for examples of the strategy on your own charts, then decide how you want to utilize the strategy. Create your own personal rules and checklist. Practice in a demo account and make sure you can trade the strategy profitability before attempting it with real money. This strategy requires thinking ahead and quick reflexes.
I typically use market orders (with a target and stop loss attached) to buy or sell when the trade triggers. You could also put stop entry orders (with target and stop loss attached) just outside the consolidation to be triggered if the price moves out of the consolidation.
For help in understanding the tech turn and failed tech turn, it’s important to understand price action. Here’s a video on analyzing price action.
My EURUSD Day Trading Course teaches you how to day trade the EURUSD in 2 hours or less a day, with the potential to make double-digit percentage returns each month (with practice) with patterns that tend to occur almost every day.
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.