Home > Do You Find Day Trading the EURUSD Tougher Lately?

Do You Find Day Trading the EURUSD Tougher Lately?

The EURUSD is the recommended pair for day trading forex, most of the time. There are times when it is tougher to day trade. During such times I tend to receive more emails from traders asking “Has it been tougher out there, or is it just me?” Many of these traders have been successful in the past, so when multiple people notice a tougher environment it is probably not coincidence (over a month or two, not just one or two days). For some insight on how to day trade the EURUSD, see How to Day Trade Forex in 2 Hours or the Forex Strategies Guide for Day and Swing Traders. Below we will look at why these “tougher” conditions develop, what typically causes them, and what to do about it.

Monitoring Long-Term Volatility in the EURUSD

Monitoring long-term volatility in a currency pair doesn’t seem like a very “day trader” thing to do. And yet it can provide perspective on whether conditions are changing…. which could affect your day trading/profitability.

Long-term volatility in currency pairs fluctuates. That means that for years or months on end a currency pair may move very well for a particular strategy. Then, for several months it may not move well. The trader either adapts to the new market conditions, or finds something else to trade–more suited to what they are used to.

This happens ever few years or so, sometimes more frequently, and sometimes less.

Much of 2014 was a tough year for EURUSD day traders. Volatility went from about 80 pips per day down to about 50 pips per day. 80 is pretty low already, and 50 pips per day won’t produce a lot of opportunity.

Volatility numbers are based on a 24-hour period. And since most day traders don’t trade all day, during any two or three hour trading window (like the London/US overlap period) a trader may only see 10 or 20 pips of movement when volatility is 50 pips per day. And if the price only moves 10 or 20 pips during the period they are watching the market, there isn’t a lot of opportunity for great trades to develop. On the other hand, when the pair is moving 100 pips per day, a day trader will likely see the price move 30 to 50 pips during an active two or three hour trading window. The more the price moves, the more likely it is to produce viable trading opportunities.

At 80 pips per day, there will still be some opportunities, but traders need to be extremely selective in their trades. Price moves/waves are smaller than when volatility is above 100 pips per day, and that will affect the quality of trades taken. When price moves are smaller the spread becomes more costly. If you are trying to grab a 6 pip profit, a 0.5 to 1 pip spread is more of a concern than when you can easily grab 10 or 12 pip profits on a trade (when a pair is more volatile). See Determining Profit Targets and Stop loss Levels for a way to reasonably see how much we can expect to make/risk on typical price swing while day trading (note that during very quiet periods, you may need to hold through multiple price swings in order to attain the desired profit potential).

The middle of 2016 and start of 2017 have also seen volatility drop in the EURUSD.

See long-term volatility charts at https://www.mataf.net/en/forex/tools/volatility

Figure 1. EURUSD Historical Volatility (pips per day: high-low), as of March 2017

EURUSD historical volatility

Alternatives If You Are Struggling with Day Trading the EURUSD

For day trading the EURUSD, average volatility above 100 pips per day often produces good trading. The number of “I am trading poorly, is it me?” emails I get is typically minimal when EURUSD volatility is above 100 pips/day. Between 100 and 80 pips per day, I notice that more people tend to struggle, especially on the lower end of that range. When volatility drops to about 80 pips per day, or lower, even more people tend to struggle.

In 2014, I wrote Dealing with Decreasing Volatility in the Forex Market. That article provided a number of options for traders who are struggling with day trading a certain pair because volatility has dropped off (or the pair isn’t moving well for the strategy being used).

  • Switch to a pair that has more volatility.
  • Move to a longer-term frame (think swing trading instead of day trading).
  • Day trade the same pair, but be SUPER patient in waiting for only the best opportunities.

Switching to a Different Day Trading Pair

When day trading I prefer to focus on one pair at a time. But when the pair you are trading isn’t providing you with good trading opportunities, you can switch to another pair. Just don’t do this too often. Sometimes a string of poor trading IS due to poor decisions, and has nothing to do with the currency pair. Take an objective look at the movements of the pair you are trading. Should you be doing better than you are? If yes, then the answer is likely within, and not a problem with the pair.

If a pair isn’t moving well, and another pair is moving better, switch to the better pair. Trade that new pair and become a specialist in it. Trade it as long as it provides good trading opportunities. Remember that even when a pair is moving very well, you won’t make money everyday. Expect to have several losing days a month. Even with losing day you can still be very profitable. Sometimes those losing days are spread out, other times they tend to come all at once.

The same thing happens in stocks. I remember I traded McDonald’s (MCD) for about a year, every single day, because I liked how it moved. Slowly over time the intra-day dynamics changed and I slowly moved away from day trading it. What I find in forex is that I typically trade the EURUSD for years on end, but every once in a while will switch to another pair. The GBPUSD is always a viable alternative, and is the first place to look. If you look at the last couple weeks of trading days/charts, and notice it is moving better (more suited to your strategies) than the EURUSD, make the switch.

Figure 2. GBPUSD Historic Volatility (pips per day: high-low), as of March 2017

GBPUSD historic volatillity

Trading On a Different Time Frame

I also sometimes step aside from day trading completely. If you look at the EURUSD, or whatever pair you are trading, and the price action looks crazy and choppy and you can’t seem to make good decisions, then step aside. Better days will come again, so save your money.

During crappy day trading times, I tend to focus more on swing trading. If day trading is much easier when the price is moving 150 pips day, and now the price is only moving 60 pips (or whatever), focus on capturing larger moves, potentially over the course of a whole day or even multiple days.

Instead of trading off the 1-minute or 5-minute chart, trade off the hourly chart or 4-hour chart (see the free Forex Swing Trading in 20 Minutes video series).

I do find that I also oscillate (over long periods of time) between being more focused on day trading, and then more focused on swing trading. But that is just me. I like day trading and swing trading, and switching between the two is quite easy in forex trading because not much changes if holding positions overnight.

The benefit of learning to swing trade is that it doesn’t have to interfere with your day trading. I typically day trade during the London and/or US overlap period, yet I place swing trades after the US market closes. So the styles don’t compete with each other. I also trade off of weekly charts. These weekly trades are looked for and managed only once per week. Therefore, there is little time commitment with this approach.

Weekly trades don’t interfere with other styles of trading, and trading on various time frames may help stabilize income when experiencing a tough time day trading.

Only Wait for the Best Day Trading Opportunities in the EURUSD (or whatever pair you are trading)

There is the option to wait for only the highest quality trades in the pair you are currently trading. This option is attractive because you aren’t constantly switching back and forth between different pairs and time frames. You are also forced to really adapt your trading to whatever the market throws at you. This will likely help you become a better trader over time. Also, it teaches patience. There are good opportunities in all market conditions, but instead of 10 trades a day, now there may be only one or two. But if you capitalize on those opportunities you can still make a living, even during the tough times. While there are some perks to this option, it is also tough. Waiting for those great trades, which don’t occur very often in poor conditions, will takes loads of patience and discipline.

What does waiting for the best opportunities mean? It means you wait for more pieces of evidence to line up. For example, you have a nice upward trend underway (which is rare when conditions are crappy) but you know that you likely can’t just buy at the usual pullback spot. Instead you opt to wait a bit.

The price pulls back and consolidates (usually where we are looking to buy) and you wait. You need a bit more evidence. The price drops out the bottom of the consolidation, and then quickly rallies. That little false breakout to the downside is a bit of extra confirmation for an upside move…and it is those little pieces of extra evidence we need to wait for in tougher conditions. That is just one example. Almost every chapter in the Forex Strategies Guide for Day and Swing Traders looks at other formations and pieces of evidence you can watch for.

Is there a best way to ride out day trading struggles?

Keep working at it. Every trader must forge their own path. After you have acquired some basic strategies, it is up to you to determine how you will implement them in ever changing market conditions. Some traders may opt to just sit on the sideways while conditions are crappy, or only take advantage of the best opportunities that occur each day. Others may try trading a different pair, while others may alter their trade time frame. There is no perfect solution. All are viable options.

Success is up to each us. It’s not the market’s fault; it is our responsibility to adapt to what the market is gives us.

Final Word On Struggling to Day Trade the EURUSD

Most of the time, struggles with trading are related to what we are doing, and the market isn’t to blame. Occasionally though, market conditions do change making it much tougher to day trade consistently and at the same profitability level that we traded at in the past (when conditions were more favorable). Even when conditions aren’t favorable, don’t blame the market. Make a change! Markets are always changing and we need to adapt with them.

Over time, one of the main things I notice is that day traders tend to struggle when the EURUSD goes from higher volatility to low volatility. Trading opportunities are less frequent, and price movements may be more choppy. Often, instead of just waiting for one or two good trades each day, traders take way more trades–trying to do what they did in the past–but the conditions don’t allow for this and the result is a bunch of losing trades.

After you have confirmed that conditions have changed (and it isn’t just poor decision making), and a particular pair doesn’t currently suit your strategies, then there are a few options: trade the same pair but wait for only the best opportunities (may only mean one trade per day), switch to a pair that offers better movement for your day trading strategies, or focus on a longer time frame.

It’s the people that overcome all these (constant) obstacles that are successful traders over long periods of time. Failure to adapt to changing conditions means a short-lived trading career.


by Cory Mitchell, CMT

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