The EURUSD is one of the most heavily traded financial instruments on the planet. The forex market does more volume than all other financial markets, including stocks and bonds. Most forex transactions occur in the Euro and the US dollar. The EURUSD is therefore one of the most popular day trading currency pairs, for a few reasons:
- Big volume
- Tight spread (compared to other pairs)
- Enough tradable movement most days
So if you are interested in day trading the EURUSD, here are some tips to help you out.
EURUSD Day Trading Tip 1: Use an ECN Broker
The lower the spread and the cheaper the commissions the better.
Day traders are in and out of trades quickly. Most of my profits are between 5 and 9 pips.
If the spread is 0.5 pips or less, then the price only needs to move 5.5 to 6 pips to hit my 5 pip target. If the spread is one pip, now it needs to move 6 to 7 pips.
That is going to affect win rate, or possibly the reward:risk needs to be reduced. Stop losses may also need to be given more room with a larger spread, further reducing the reward:risk.
Ideally, the spread should be 0.5 pips or less. A little bigger is ok, but as discussed, you may need to accommodate for that or be more selective with trades…waiting for those opportunities that provide a bigger pip reward.
Commissions are a straight-up cost. The more expensive the commission, the less money in our own pockets. $1 to $3 per standard lot (100K of currency) is a great commission. $5/standard lot is manageable. $7 is high.
See the Steps For Picking a Forex Broker.
EURUSD Day Trading Tip 2: Prepare before trading each day
Each morning I start off by writing one paragraph on why I trade, and my thoughts to focus on throughout the day. This may be something that I’ve been struggling with recently, or it may just be a reminder to limit my expectations and follow the plan. I express gratitude that I get to trade for a living. Or some mornings I just remind myself I belong here; that trading for a living is what I do.
Limiting my expectations is a big one. I don’t want expectations going into the day. I know how my trading plan performs, but on any single day I could lose, make lots, or find no trades. My only job is to analyze the price action and maintain a calm and focused mind.
Continuing to drill these concepts. I spend 20-30 mins a day going over these and explaining to myself why I do them.— Cory Mitchell, CMT (@corymitc) November 28, 2022
If it prevents me from making 1 or 2+ mistakes a day, that's massively worth it.
Don't wait for mistakes to happen, nullify them before they happen. pic.twitter.com/WLCCyav3Df
If I have been jumping out of trades too early (or into trades too early), I write a few words about this and how I’m going to do better at that ONE task today.
This is part of a pre-trade routine. A pre-trade routine is not required, but it can help some people get into a better state of mind for trading.
EURUSD Day Trading Tip 3: Scale the Y-Axis
This may seem like a weird one, but if we’re technical or price-action traders, we’re often trading based on what we see.
If the price has moved 10 pips from high to low (the price action on your screen) and you zoom in the y-axis so you can only see the 10 pips, then the up and down moves look very big…they take up the whole screen! If you scale the y-axis to show 100 pips, now the 10 pips of price movement looks very small.
From day to day, keep the y-axis at a set minimum. Only expand it if the day’s price action dictates to do so (you need to expand the y-axis to see all the price action).
I set my y-axis at the EURUSD’s daily average movement (10-week average). I only update my y-axis when there is a significant change in volatility. For example, if daily average movement is 70 pips, then every day before I start trading I set my y-axis to show about 70 pips.
This means that the size of price moves look similar from day to day.
Keep as must consistent in your trading as possible if you want consistent results.
This is discussed more in the article How to Scale Your EURUSD Day Trading Chart.
EURUSD Day Trading Tip 4: Know When Not to Trade
There are times when the movement is not worth trading.
If there’s less than 15 pips of movement in the last 2 hours, I’m very cautious. I likely won’t take trades, and if I do I’m more willing to pull the plug on a trade early (take what profit I can get instead of holding until an established profit target) because I already know conditions aren’t great for trading.
In low movement, the price is more likely to chop around, making it harder to find winning trades with attractive reward:risk ratios. Also, if the price isn’t moving much, but we keep trading, this can increase commission costs which are unlikely to be offset by winning trades. The spread also becomes more of a factor when there’s low movement.
The less movement there is, the bigger the percentage of that movement the spread occupies. And the spread is a cost.
Establish your rules for how you will handle low movement. Knowing when not to trade is as important as knowing when to take a trade. If trades are taken in poor conditions, profits made during the good times can easily evaporate.
EURUSD Day Trading Tip 5: Don’t Lose More Than 1% on a Trade
Whatever your account size is, don’t lose much more than 1% of it on a single trade.
On a $10,000 account don’t lose more than $100 on each trade. This way, losing one trade, or even several trades in a row, doesn’t deplete the account much. Most of the capital is still intact and can be used to make the losses back.
I risk 1% on each trade, this way, good returns are still possible. If we risk 1% of our account on a trade, but can make 2 to 3% on a trade, that’s a great daily return…even if we only win half our trades.
We can risk 1%, and make 2% or more on a quick trade, because of leverage. For example, we can place a day trade with a 3 pip stop loss and a 9 target. If we lose, we lose 1% of our account, and if we win our account increases by 3%. The same could be said for a 5 pip stop loss and a 15 pip target, or a 1 pip stop loss and a 3 pip target.
As our stop loss size changes, our position size changes (how many lots we buy/sell). This allows us to always risk 1% of our account no matter what the trade looks like.
I commonly use a 2.5:1 reward to risk while day trading the EURUSD. This means if I risk 1% per trade, I make 2.5% on my account when I win the trade. Even only 50% of trades, and taking on average three trades per day, this works out to more than 30% per month (see more profit scenarios here).
EURUSD Day Trading Tips 6: Position Sizing on the Fly
Day traders make quick trades, and often don’t have time to manually place stop loss or profit target orders.
To automatically place a stop loss or profit target when initiating a trade in MetaTrader 4 or MetaTrader 5, right-click on the chart and select “Depth of Market”.
You’ll see the window on the left pop-up. At the bottom of this window, input your position size, in standard lots.
5 is 5 standard lots.
0.5 is 0.5 standard lots.
0.1 is a mini lot.
0.01 is a micro lot.
0.73 is 7.3 mini lots (0.73 standard lots).
In the SL field, put your stop loss in fractional pips.
20 means 2 pips.
75 is 7.5 pips.
The same goes for the target.
40 is 4 pips.
400 is 40 pips.
To make a trade, make sure your SL, target, and position size are correct, click buy or sell, and the rest is done for you.
If your orders appear on your chart (Tools, Options, Charts, Show orders), you can click on the stop loss or target and drag them around to different prices.
Play around with it in a demo account before using it with real capital.
EURUSD Day Trading Tips 7: Set a Daily Loss Limit
We already discussed controlling risk on each trade. At most, lose 1% per trade.
A daily loss limit controls how much we lose in a day. It doesn’t matter if we only lose 1% on a trade if we lose 20% in a day by taking a whole bunch of poor trades. Our risk management is still poor.
Set a daily risk limit. I typically set mine at about 3%. If I lose more than 3% of my account in a day, it’s obviously not my day. Make it back another day. Close the trading platform and don’t open it again till the next day.
Do a daily review (every day) and see if there was anything that could have been done better. Sometimes there is, but sometimes there isn’t. If we followed our strategy and it just didn’t work that day, pat yourself on the back for following your trading plan.
I also like implementing a “loss from top” limit. This is also 3%, although you may decide on another figure. If I was up 5% on my account for the day, and then I lose 3 trades in a row and am now up only 2%, probably best to call it day. Take the profit. There is always another day to trade.
Overall, if things turn sour, turn off your monitors. As trades, our main goals are self-preservation, to live to trade another day, and to keep profits when we have them.
EURUSD Day Trading Tip 8: Have a Method
I have written a number of articles on strategies on the site, so I will list a few of them here.
Above all, understand price action. Once we see how prices tend to move, then we can start building our own strategies. How to Spot Trends and Revesals Using Price Action covers the need-to-know stuff.
The EURUSD Session High Low Day Trading Strategy – This strategy capitalizes on a tendency for the price to pop through the high or low of the day (or major highs and lows that haven’t been touched in a few hours) as the price gets close to it. I use this quite often in conjunction with other strategies.
The Double Pump EURUSD Day Trading Strategy – This is a trend-following strategy that capitalizes on a brief pause before the trend continues. It’s covered in more detail in my EURUSD day trading course.
Snap Back Day Trading Strategy for EURUSD 1-Minute Chart – This is a trend-following strategy that capitalizes on a pullback and then a sharp move back in the trending direction. It too is covered in more detail in my EURUSD day trading course.
EURUSD Day Trading Tip 9: Unrecognizable = Don’t Trade
We have a strategy. It has rules for when we enter and exit. But the market will often present us with setups that look similar to our strategy but aren’t quite right.
Leave these trades alone; don’t trade them. They don’t fit the strategy.
What you can do is note them on your chart and keep a copy of the daily screenshots. Then, when you have 50 or so examples of a particular variation, you can tally up how profitable (or unprofitable) it would have been to trade all of them.
With that information, you can then decide if you want to include that particular variation of the strategy in your trading plan so you can start trading it.
Avoid the impulse to take “it’s kinda similar” trades until you have gone through this process. You will waste a ton of money trading essentially random patterns which are untested and that draw your focus away from the strategies and trades that you know work. Over time you will realize there are certain variations of the strategy that work well, and ones that don’t. There is no reason to waste money guessing which it will be. Avoid them all, until you can verify which ones work. Then include those in the plan and start trading them.
Also, being able to avoid setups that aren’t quite right is a practice in discipline, a key ingredient to trading success.
The market will always tempt us; it’s our job as traders to stick to our own rules. We need discipline while we trade, and there are tools available to help us strengthen our self-discipline.
My EURUSD Day Trading Course guides you through trading a few common patterns that tend to occur multiple times per day, providing loads of opportunities to capitalize.
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.