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Day trading strategy for EUR/JPY

The average daily trading strategy consists of certain steps, including analysis, setting certain targets, placing orders, and executing a deal. The main idea of such a strategy is that the trade depends on the analysis that you have carried out beforehand, and there is no need to be in front of your computer keeping track of the slightest price fluctuations after conducting a trading operation.

This fact has a very positive effect on a trader’s emotional state. Forex is a liquid and high-yield market. However, the risk of losing one’s capital is very high since the success of one market participant is provided by the failure of the other. The average daily trading eliminates unnecessary emotions. The duration of open positions ranges from one to several days. But in some cases, the deal can take several weeks, especially with low volatile pairs.

A very convenient financial instrument for the average daily trading strategy is the EUR/JPY pair. The preparatory process for the deal, its closing, and the waiting time are very exciting. Before making a trading decision on the EUR/JPY pair, it is necessary to analyze the market (the instruments related to the euro and the yen) to avoid any mistakes. The depreciation for a few days does not mean that the market becomes bearish. The reason for a decline may be a correction or a large investor stepping in with its trading volumes moving the price. As a rule, buying/selling a currency in huge volumes is done not in one operation, but in several steps. This creates a misleading mood which many traders, mostly scalpers, adhere to.

The examples of such trades are very common. Thus, in August 2008, there were about four similar situations with EUR/JPY. Of course, for day traders it was an excellent opportunity. However, for the average daily trading, it was a false signal with the changes of about 150-200 pips which was enough to trigger the stop loss.

The average positions that should be selected for this instrument are the following: the trade volume should not exceed 20-30% of the deposit, while stop orders should be put at around 100 pips, if you are ready to lose 20-30% of your deposit. For the EUR/JPY pair, 100 pips is a good trade size, although many traders prefer to limit their losses to 50 pips and are satisfied with the profit of 15-20 pips. In this case, losses for June-August 2008 would have exceeded profit. The changes in the bull market in June amounted to 600 points, in July they were more than 200 points with breakouts in both directions, while in August the difference was 800 points. Therefore, taking into account the trend, it is worth setting stop loss orders at 80-100 points, and take profit orders - at 50 points. However, with optimistic forecasts, this range can increase.

Before entering a trade, you should determine the market direction, study the analysts’ forecasts, and, if possible, find out the cause of the price change. The reason for price fluctuations can be economically justified, for example, by the decrease/increase of imports/exports in order to stabilize some economic indicators. If you do not expect any news releases in the certain period, i.e. reports or statements, you can open a deal. In this case, only force majeure circumstances can influence the price.


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