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What Is This Strong Forex Day Trading Strategy?
Please use this strategy, while you do know that you trade at your own risk, and what we share here is for training and educational purposes only, and is not a trading or investment advice.
I start with EUR/USD daily charts, but at the same time I am going to give you some very important tips about MetaTrader (MT4) because placing pending orders and setting their stop loss and
target (take profit) orders are among the most frequent questions I am usually asked. So here in this article, you will learn about all of these.
Below is EUR/USD dollar daily chart. In my previous video, I have talked about day trading, using the daily candlestick and daily time frame. If you didn’t have a chance to watch the video, please do
it because in that video, I have promised to talk about this system you are going to learn here on this page, and I have given an important introduction. So, it is a big help if you watch that video or read this article which is related to the same video.
In each of my videos I give you a few tips about this system, so that you will become able to follow this system, in case you are interested in day trading which is what many of the traders are also interested. Day trading is so popular among Forex and stock traders because many traders don’t like to hold their positions for several days or several weeks or maybe several months so they refer to the shorter time frames like 15 minutes or even 5 minutes or 30 minutes. I have even seen that some traders even use one minute time frame to do a scalping. I will explain about “scalping” later, but this is not really good because they think that they are trading actively they sit at the computer for several hours a day, monitoring the market and sometimes they miss the trade setups because these short time frames move so fast and you have to look at the monitors all the time during the day, not to miss the trade setups. If you enter with delay, there is a higher chance to lose money and believe it or not, I have never seen a day trader who uses these shorter time frames to be consistently profitable. They lose most of the time and they spend lots of time in front of the
computer. It can even cause physical problems like eye problems and so many other things, and it is wasting of time and money. It doesn’t let you enjoy your life. It doesn’t make sense to sit at the computer and look at the monitor for over six or eight hours a day and then lose money after that. Sometimes they miss a trade setup just because they left the computer for a few minutes and then when they come back, just because they have missed the trade setup they get in with delay, and so they have to set a wider stop loss.
Therefore, when their stop loss is triggered they lose more, so this kind of day trading is horrible. Never use these shorter time frames to do day trading (not even one hour time frame). It is a long time that even four hours chart is choppy most of the time because currency market is too volatile and it has become hard to trade the four hours chart as well. But if you really want to take positions and not to hold them for more than 24 hours and you really insist to be a day trader, you can follow the system that I am explaining here in this article (and of course in this video).
You can use the daily time frame while you are also aware of the monthly and weekly time frame situation. In my my previous video, I have explained how important the monthly time frame is, and why you must take a look at the monthly time frame and not to go against it, even if you want to be a day trader. If you go against the monthly time frame direction, Even if you are trading with 5 minutes chart, you will have a higher chance to lose because even if the shorter time frames go against the monthly time frame direction, they will follow the monthly time frame eventually,
and the movement they make to follow the monthly time frame will be much bigger and stronger. So there is a higher chance to have your stop loss triggered, when you use the shorter time frames and you take positions against the direction of the monthly time frame. So you have to look at the monthly time frame all the time, before you start day trading, and also the weekly time frame.
In my last two videos (here and here), I have analyzed the monthly and weekly time frames. So please make sure to watch those videos, and then refer to the daily time frame to follow the analysis that I am going to explain here in article and the video that is related to it.
On the monthly time frame (see the below screenshot) the market is so close to two resistance lines, and still we don’t know whether they are valid or not. I have explained why, in my last two videos (here and here). Any of these two lines can be valid and as you can see the current forming monthly candlestick is so close or moving around these two resistances. So it is possible that it reverses and goes down at any time, and this is what you must keep in your mind, if you want to trade using the shorter time frames like daily. This is a red flag here in case because the daily chart can make you go long, but it is possible that this market reverses at any time, because of what we have on the monthly chart:
The weekly time frame looks really great. It is a strongly bullish the candlesticks are really strong. Just the size of the last weekly candlestick is much smaller than the last closed weekly candlestick, but please consider that this candlestick still has several days to mature and close. So ,it has a chance to go higher and close above. So, the weekly time frame is not against going long:
There is only one red flag on the monthly time frame which is moving around these two resistance lines that you already saw. It is possible that this market goes up for hundreds of pips, and then closes above the resistance lines, which means either those two lines are invalid, or if they are valid, the market has broken above them. But you have to keep in your mind that there is also a chance that EUR/USD reacts to these two lines and goes down at any time.
Let’s refer to the daily time frame. The last daily candlestick closed with a long bullish body. I explained in my previous video that the July 28th daily candlestick (see the below chart) that closed with a small bearish body was not enough to go short because it was so small and was formed at the top of a strong bull market. But at the same time, we didn’t have enough reasons to go long as well, although the market was strongly bullish. But this red candlestick could be a red flag for us and could tell us that maybe the next candlestick would be red. So, we didn’t take any positions after July 28th candlestick but the next candlestick is big and bullish and about 77 pips long, if we just consider the body, and is about 91 pips long, if we consider the upper shadow. So, after the small bearish candlestick that formed on July 28th, when a bullish candlestick forms on a strong uptrend, it means the uptrend wants to be continued and bulls still have the control. So, it is highly possible that the next candlestick to be a bullish candlestick as well. The only red flag as I explained is on the monthly time frame which is moving around the two resistance lines you saw above. This red flag can make you forget about going long for now and as long as this market is moving around these two resistance lines (unless it breaks above them), or forms a sell signal below them. So, if you want to consider this red flag and forget about going long, then you’d better to wait for now. But if you just want to consider the daily time frame, it is telling you that it is strongly
possible that the current daily candlestick (July 29th) to be a bullish candlestick:
In this system, I don’t recommend you to get in the market by referring to the new order window on MT4 platform and clicking on the sell or buy buttons, because when you do that, you get in the market and you have taken a position.
What you can do is placing a pending order. It has become really easy to place pending orders on the last versions of MT4 platform.
I strongly recommend you to follow the below parts in the video HERE, because it is hard to understand what I am explaining without seeing in a video.
Let’s say you decide to go long, if the market goes up and breaks above the high price of the last closed daily candlestick. As the last closed daily candlestick was a bullish candlestick on a strong bull market, if the price goes up and breaks above the high price of this candlestick, it means that it wants to continue the uptrend. If you go just a few pips above the high price of this candlestick which is at 1.180, while the high price of the last closed daily candlestick is 1.18055 (hover your mouse pointer on the candlestick and then you refer to the bottom of MT4), you will see the four prices that each candlestick indicates. And as you can see, the high price is 1.18055 and the line that I have plotted on this chart is about three pips above the high price of this candlestick. So, it is where you can place your pending order. Now I remove the line (please see the video here to know what I mean) to show you how you can place your buy pending order. Buy pending order, or according to MT4, buy stop, is a pending order that if the market reaches to that level, it buys for you and you will have a long position. So, at any level that you want to set a buy pending order or a buy a stop order, you need to hover your mouse pointer at the level that you want to set your order and then you right click and hover your mouse pointer on trading, and then refer to the next menu and click on buy stop. If you do that, a buy a stop pending order will be placed:
Note: Here on LuckScout.com, there is more detailed article about placing pending orders: Buy Stop and Buy Limit, Sell Stop and Sell Limit Pending Orders on MetaTrader 4
If you refer to tools and then options on the top menu, there is a tab which is called “trade”. On this tab, when one click trading option is checked, you enter the market when you click on buy sell buttons and MT4 doesn’t ask you for confirmation. But when it is unchecked, if you set a pending order, it will ask you to confirm:
You can cancel the pending order because you are not in the market yet, and so you can cancel the order. But when you take a position, you have to close it, and you must pay the spread. If you think you want to cancel it, you can right click on the dashed line on the chart that shows your buy pending order, and you click on the delete option, and then on OK button. The buy pending order will be deleted:
I don’t recommend you to make the one-click trading option unchecked because it gives you the chance to confirm the position you want to take or the depending order you want to set.
While placing the order, I can change the lot size. If I click on “place” the buy pending order will be placed:
If you want to change the pending order position, you can hover your mouse pointer on the dashed-line, and then drag and drop it. For example, if you want to take it higher, you just take it there
and then release the mouse button and click on the modify button, so that the pending order will move higher. And if you want to take it lower you can drag and drop it to a lower level, and then you click on the modify button, and the modification will be applied. Please see the video here to know what I mean.
If you refer to view on the top menu, and then you click on terminal or you simply hit Ctrl+T, the terminal window will be opened at the bottom of MT4 platform, where you can see your buy pending order listed. You can double click on it, if you want to change it. So you can do the modifications from terminal as well. You can set the stop loss and take profit orders, or if you click on delete, the pending order will be deleted. Once the pending order is triggered, it will be listed on terminal as well, so you can refer to terminal and see how your trade is going , whether it is in profit or it is losing now. You can modify the order from terminal too, so if I right click on it and I click on modify, then it allows me to set my stop loss:
How the Stop Loss and Target Has to Be Set in This Case?
The order we placed is a “buy pending” or “buy stop” order that will be triggered where the dashed-line is placed. So, when you should be out, if the market goes against you???
It depends on the risk that you want to take. What I recommend is that your risk shouldn’t be bigger than the size of the last closed daily candlestick. So, if you want to set your stop loss, it has to be somewhere around 1.17275. Don’t set a too wide stop loss. It shouldn’t be longer than the size of the last closed daily candlestick. It can be around 1.17275 or a little higher, but if you think it
is a too tight a stop loss, you can go lower and set the stop loss below the last closed daily candlestick. So if I set the stop loss at 1.17275, it will be an 86 pips stop loss.
The target order can be about 80 pips or 84 or 85 pips. Please see the video here to how I set the stop loss and target orders.
The other thing that i recommend is that if the buy pending order becomes triggered and the market goes up and takes half of the way toward the target, you’d better to move your stop loss a little higher, and when it becomes about 10 to 20 pips close to the target order, you can move the stop loss to break even which means the stop loss will be placed at the same level that you have taken
We have to wait and see. We never know what will happen. It is possible that this market goes up and triggers the pending order and starts moving toward the target. It is possible that it goes up, triggers the buy pending order, but goes against us and hits the stop loss. And it is possible that it moves below our pending order, and never triggers the pending order for now. This is what we have to wait and see.
How strong Is This Position?
I said, just because the uptrend is strongly bullish, the last closed daily candlestick has closed with a bullish body, and the market is strongly bullish on the weekly time frame as well, this is a strong position, and I see a 70% chance of hitting the target… maybe around 70 or 60% or maybe even more between 70 to 75% maximum. The only red flag as I told you is what we have on the monthly time frame. The market is moving around the resistance lines on the monthly time frame and this can make some traders stay away from the market, as long as they don’t know whether the resistance lines (you saw them above) are valid or they are broken or what. So, these are the things that you have to consider based on the daily and weekly time frames. I think this is going to be a strong position. Let’s wait and see.
Don’t Take Too Much Risk
The other tip about this kind of trading is that when you want to take a position with currency pair like EUR/USD, and you see exactly the same situation and trade setup on another currency pair
like GBP/USD, then you’d better to take only one of them because these currency pairs or I’d better to say all currency pairs are correlated. If you see a good signal on one of them and you take a position with it, then you’d better to forget about the other signals you see on the other currency pairs, unless you see that exactly the same signal is much stronger on another currency pair, like GBP/USD. If so, you can cancel that pending order on EUR/USD and place the same pending order on GBP/USD. But don’t take a position with all of these currency pairs because if they go against, you all of them will go against you. These are all correlated to each other. They are all linked by USD, and so they are strongly correlated to each other. Don’t take several positions with several currency pairs. If you do so, you are increasing your risk.
The Same Trade Setup on GBP/USD As Well
Click Here to watch the video of this part of my that starts from 21:29.
Below, is GBP/USD daily chart. As you can see, the last closed daily candlestick has closed above a resistance line and still we don’t know, if this resistance level is valid or not because the last closed daily candlestick which was July 29th daily candlestick went up and closed above the resistance line, without showing any reaction to it, which means maybe the resistance line is invalid because the market hasn’t respected it. But it is also possible that this resistance line is valid and is now broken, and then the GBP/USD market goes down to retest this resistance line, and during retesting, you will know that the broken resistance line was valid because after it is broken it works as a strong support. This is something that we have to wait and see.
If we wanted to set the same by pending order here, we could do that as well because there is almost the same condition here. Just the uptrend is not that strong. The market is bullish, but it has been moving sideways for a while. But this market doesn’t look as bullish as EUR/USD market:
However, the difference is that this market is not close to the resistance line that EUR/USD is on the monthly time frame. So, the red flag that I showed you on EUR/USD monthly chart cannot be seen here, and the current market price is about 500 pips below this resistance line:
On the other hand, if you refer to the weekly chart, you will see a huge big bullish engulfing pattern which is so strong (see it below), and as I told you, it is possible that this market goes up for the next several months or even years, just because of this signal. On the weekly chart, the market is about 180 pips below the resistance line that I have plotted on the weekly chart. Therefore, to some traders GBP/USD has a better condition to set a buy pending order at least for the next 24 hours, compared to euro us dollar, because it doesn’t show the red flags that I showed you on the EUR/USD monthly chart. The only difference is that EUR/USD market is strongly bullish on the daily and weekly time frames, while the bullish movement on GBP/USD has just been started, and it hasn’t formed an uptrend on the weekly chart yet, and not even on the daily chart. We don’t see any strong uptrend here. Maybe we are at the beginning of a strong uptrend but it hasn’t moved yet:
Think About the Risk, Not the Profit
As you saw, deciding about taking a position is all the matter of analyzing the risks that it’s gonna have. When you want to take a position, you have to compare the risks you shouldn’t think about profit. You must think about the risks that you’re gonna take. You should think that it has a higher risk, if you take a long position with EUR/USD, or it has a higher risk, if you take a long position with GBP/USD. You are the one who has to decide because you are the one who is taking the risk. Everybody trades at their own risk. You are the one who sets the pending orders. You are the one who clicks on the buy and sell buttons. You can’t do that just because I am telling you that this market is bullish or that market is bearish. I am just analyzing and give you some information. You are the one who makes the decision. So you have to take the responsibility of the positions that you take and when you want to trade. You have to consider the risks, not the profit. When you see that taking a position is too risky, you have to forget about it, and check the market the next day. Markets are always there waiting for you and your money. New trade setups form all the time. If you miss some trade setups or some movements, it’s okay because new trade setups will always form. But if you don’t consider the risks and you lose your money, or you wipe out your account, just because you don’t set a stop loss chances are you can never start trading because you don’t have money.
These are the things that you must consider.
The last chart that I am going to show you in this video is USD/CHF. I talked about the support level you see on the below chart, on USD/CHF weekly, monthly and daily time frames. It seems the market has broken below the line, but just because it is extremely oversold, I don’t recommend you to take a short position, unless this market proves that the support level is valid. So, if it goes up and reaches the broken support level and the broken support level works as a strong resistance, we will know that the line was a valid support line, and it is going to work as a resistance after the breakout.
And if this market forms another cell signal below the broken support level, then we can take a short position, but taking a short position right now is a little risky because it is possible that this market goes up for about 40 to 50 or maybe 70 pips to retest the broken support level. So, let’s wait for the EUR/USD market to see whether it’s gonna hit our buy pending order or not:
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