Real Moments of Opportunity – Trading High Quality Setups

Day trading is a fantastic way to earn a living if you’re able to do it, but there are definitely some potential drawbacks to watch out for. One in particular was abundantly clear in the Euro FX futures. Day traders frequently follow a handful of markets and not uncommonly, some focus to a single instrument to trade. Whilst getting to intimately know a product certainly has its advantages, only trading those markets means seeing them day in and day out even when they’re not great.

Gotta Make Some Money

To an aspiring day trader, the desire to make a certain amount of money every day is strong. Sure, they might understand that when you trade, you’ll get a variable result with an overall target average. But it’s easy to get caught up in the “I want to make x dollars a day” mentality, whereby anything short of this can feel like a failure. You don’t want to end up down on the day, but if you are, the next day you naturally want to take something back.

Seeking Opportunities

So there’s a constant drive to seek trading opportunities. But when you are focused on a small set of products, the opportunities where you have a high potential for profit and a clearly defined level of risk, won’t always be available to you every single session. In fact, there are plenty of sessions and strings of sessions that are going to be somewhat fruitless. In fact there are a not insignificant amount of what could be considered futile sessions.

Yet there’s still a constant need to find trading opportunities and fabricating opportunities where there are none is clearly a hazardous game. But consider this – traders only have a certain capacity for dealing with stress and by trading in choppy sub-optimal conditions, this capacity can become depleted quite quickly. And when you’re in this state, it’s much harder to shift gears – and it can be all too easy to fail to recognize the great trades when they came along.

Euro Sets Up

In May, leading up to the ECB rate decision, there was basically one solitary move in the euro and the rest was sideways and not particularly great movement.

Euro 60 Minute Chart

It’s not too hard to see that if you’d been chopped at all or been caught on the wrong side of the one move, you might have gone into the ECB day on Thursday with a deficit to make up. If you’d have been switched on to it and in a healthy frame of mind, Thursday (in the context of the movement leading up to it) was a powerful marker for what was to follow on Friday.

Listen to Draghi

What happened on Thursday was that the ECB left all rates unchanged and that had the longs feeling bolder about the obvious feeling that the ECB weren’t going to act on what is viewed as problematically low inflation. IF they had done something, price would drop as liquidity relative to the dollar would need to increase. So the converse is true if they don’t act and price accelerated higher to reach a peak just shy of 1.4000. But then during the Q&A session, Mario Draghi (President of the ECB) start taking a rather more direct tone in what the ECB is likely to do in order to tackle this problem. He gave the market a very strong hint that the ECB will act in June (with the usual ifs and buts attached). The euro reversed and had dropped over 150 pips into close.

Big Clue

So with the macro context of the ECB being likely to act to lower the exchange rate (the exchange rate is now directly on their radar) and the technical context that the market spiked higher after showing strength recently (suggesting trapped longs needing to exit), the probabilities of a follow through at least on Friday, were high. After very little interest in moving higher early in the EU session, the euro did just that and trended down for the rest of the day.

Euro 15 Minute Chart

Being patient and waiting for good trading opportunities is vitally important and day trading is no different here. In fact it’s because of the need to try to make money every single session that it’s perhaps even more important for day traders to remain focused on high quality setups. When chances like this one do come around, make sure you take advantage of them.

Trade well.

For more updates from Mark and the team at NetPicks, be sure to visit their trading tips blog at