Trade #3: Prolonged EURUSD Scalp

Lots of discussion points on this one. Lets start by looking at the daily chart set up.

6E 1-day time frame

The main focus here is the solid cyan line at 1.10560. This level has strong significance, not only being a previous swing-high, but also has importance on lower time frames. The red level is our primary invalidation point. The highlighted yellow box shows the daily candle which made the low in the leg we are retracing.

The following chart shows the shaded yellow area in a lower time frame.

6E 1600-tick time frame

You can see further significance of the 1.10560 to 1.10580 level (the cyan lines). This was the first support gained on the up leg that we are retracing, and was untested in our current move.

Even though we were dropping with lots of bearish momentum, I decided to target this area for a long scalp and entered an order for 2 contracts at 1.10570. The plan was to take profits on 1 contract at the first possible lower time frame level and let the other half run. It didn’t quite go according to plan.

6E 1600-tick time frame current price action

First thing to note, is that we didn’t respect 1.10560 as expected. Crashing through to 1.10500. Not a good way to start a lower time frame scalp. I immediately started scrambling for the significance of 1.10500 but couldn’t really find much (marked on the yellow-box chart earlier).

I decided to check the underlying EURUSD spot chart to see if this gave me any clues.

EURUSD 1-day time frame
EURUSD 15-min time frame leg start area

The first thing I noticed was that the highly relevant cyan level on the 6E chart had no real significance on the spot chart. As we were hitting the cyan level on 6E, the underlying was hitting 1.10282 (purple level above). This was technically the high of the 15-min candle which produced our low. But it’s not really something I would want to trade given the context. Luckily we had a more significant daily level at 1.10255 which was getting more respect on the spot chart.

EURUSD 15-min time frame current price action

What About The Trade?

Well due to my less than perfect entry, this quick 10-minute scalp had suffered significant drawdown and lasted 2 hours. I did manage to close the position for a small profit. Due to my poor entry, and news soon to be released (and potential volatility) I exited the whole position at the first chance I got to minimise my risk.

M6E 133-tick time frame showing trade
Ninja Trader Performance Chart

Lessons

Underlying spot levels are more important than derivative levels! I should always check both charts when identifying levels of significance, and to give a stronger weight to the spot charts.

I am happy with the way I reacted during my trade. I knew my entry wasn’t ideal and I gained further information during the trade (spot level was off) so knew that it wasn’t the time to try for a runner. The exit position was as good as I could have wished for, I didn’t want to be in the position where I take more draw down in the hope of a reversal lower.

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